Marks & Spencer has warned it cannot rule out a price hike after absorbing an extra £120 million in costs resulting from Chancellor Rachel Reeves’ National Insurance changes and upcoming pay rises.
Chief executive Stuart Machin said the retailer would “do everything we can” to avoid passing these costs on to customers, but acknowledged the company faced “very significant costs to mitigate”.
M&S expects its tax bill to increase by £60m next year to around £520m following the Chancellor’s decision to raise employer contributions to National Insurance by 1.2 percentage points to 15% from next April, alongside cutting the minimum Then companies start paying it.
Mr Machin commented: “We planned (for an increase) because it was seen before the Budget that there would be some increase in National Insurance for businesses. We didn’t see the double whammy coming.”
In addition to the higher costs caused by the NI changes, M&S expects a further £60 million increase in labor costs due to the rise in the minimum wage – a cost the retailer has already taken into account.
Machin said M&S would work “incredibly hard” to reduce expenses elsewhere to avoid higher prices for customers, noting that there were currently no plans to raise prices. He stressed the company’s “good track record” in achieving cost savings.
The warning comes amid warnings from retailers about a “avalanche of costs” after the Budget. Analysts suggest that the NI changes alone could add between £550m and £600m to the costs of UK grocery stores.
Earlier this week, the owner of Primark indicated it may explore options such as offering a self-checkout service to reduce the business bill.
The budget also sparked wider discontent among businesses. Recent figures show two-thirds of bosses feel negative about the budget, with the same proportion believing Ms Reeves’ actions do not support growth, according to a study by the Institute of Directors.
Machin’s warning comments coincided with M&S shares reaching their highest level since 2016, after the company reported a 17% rise in profits before tax and adjusting items to £408m for the six months to September 30, beating analysts’ expectations of £360m. Sterling.
M&S shares rose as much as 7.4% on Wednesday morning.
The strong results are seen as evidence that Machin’s turnaround strategy for the retailer is on track, with its food and clothing divisions recording growth over the six-month period.
Expressing optimism about the upcoming Christmas season, Machin cited M&S research suggesting customers plan to spend more this year compared to last.
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