M&S is the latest retailer to warn of price rises following the Government’s Autumn Budget tax raid.
The boss of the posh chain said it would have to pass on extra costs caused by the upcoming hike to employer National Insurance contributions (NICs) and minimum wage.
Stuart Machin said the retailer wanted to pass on “as little as possible” in costs to customers but the company had been forced to tweak its business plan for the coming years.
He added any price rises would be “small and behind the market” but did not say how much exactly they would go up by.
Before Christmas, M&S warned that the combined rise in NICs and minimum wage would cost the company £120million.
Mr Machin said today: “Our suppliers are also feeling the pinch, and that comes through straight to retail.”
The M&S boss, who took the helm in 2022, said he did not foresee big job losses following the Government’s tax raid.
However, he said the retailer would have to be diligent on where it recruited new staff.
“Does it make us look at how we recruit? Of course it does, and that does mean we have to think about where we invest.”
The price warning comes despite M&S posting positive sales over the busy festive period, driven mostly by its food division.
The retailer made £4.06billion in sales during the three months to December 28, up 5.6% compared to the same period the year before.
M&S food sales grew 8.7% year-on-year, and the department made up just under two-thirds of total sales.
In contrast, the company saw 1% sales growth across its clothing, home and beauty departments.
M&S is one of a number of retailers and pub chains warning of price rises after the Government’s decision to increase employer National Insurance contributions (NICs) from April.
Planned raises to the minimum wage have piled further pressure on businesses.
The British Retail Consortium, which represents UK retailers, said it expects to see food prices rise by 4.2% in the second half of this year.
Today, chief executive of Tesco, Ken Murphy, refused to rule out future price rises, stating: “What I won’t say is there will be no inflation, but we’ll do out very best to minimise the impact.”
The boss of major bakery chain Greggs Roisin Currie said it had already hiked the price of sausage rolls and other customer favourites following a rise in the national living wage and the upcoming rise to employer NICs.
Earlier this week, Next said it would need to push through an “unwelcome” 1% rise in prices too.
The retailer reported a better-than-expected 5.7% rise in underlying full-price sales for its fourth quarter so far.
But over the new financial year to January 2026, it expects sales growth to slow to 3.5% and for group profits to increase by a more muted 3.6% to £1.05billion.
Employers currently pay NICs on workers earning £9,100 or more a year, at 13.8%.
But from April 6, this will rise to 15% and the threshold at which bosses pay them will fall to £5,000.
RETAIL SECTOR STRUGGLES
The tax raid on businesses comes after years of pain for the retail sector.
The Centre for Retail Research has described the industry as going through a “permacrisis” since the 2008 financial crisis.
The industry has struggled for footfall into physical branches following the rise of online shopping.
The coronavirus pandemic increased this trend, while the higher cost of living has seen shoppers’ budgets hit.
A number of major retailers have fallen into administration in recent years, including Ted Baker, Carpetright and bargain giant Wilko.
Other retailers have downsized their portfolios, like Boots.
In 2024, independent retailers were hit particularly hard, with 11,341 stores shutting – a 45.5% increase from 2023.
But, it’s not been all bad news across the sector, with some retailers, offering cheaper goods and products, capitalising on squeezed shopper budgets.
B&M, Aldi and Lidl have all announced plans in recent years to open hundreds of branches across the UK between them.
Last year, Home Bargains said it wanted to open 400 new stores in the coming years to take its store portfolio to around 1,000.
Why are retailers closing shops?
EMPTY shops have become an eyesore on many British high streets and are often symbolic of a town centre’s decline.
The Sun’s business editor Ashley Armstrong explains why so many retailers are shutting their doors.
In many cases, retailers are shutting stores because they are no longer the money-makers they once were because of the rise of online shopping.
Falling store sales and rising staff costs have made it even more expensive for shops to stay open. In some cases, retailers are shutting a store and reopening a new shop at the other end of a high street to reflect how a town has changed.
The problem is that when a big shop closes, footfall falls across the local high street, which puts more shops at risk of closing.
Retail parks are increasingly popular with shoppers, who want to be able to get easy, free parking at a time when local councils have hiked parking charges in towns.
Many retailers including Next and Marks & Spencer have been shutting stores on the high street and taking bigger stores in better-performing retail parks instead.
Boss Stuart Machin recently said that when it relocated a tired store in Chesterfield to a new big store in a retail park half a mile away, its sales in the area rose by 103 per cent.
In some cases, stores have been shut when a retailer goes bust, as in the case of Wilko, Debenhams Topshop, Dorothy Perkins and Paperchase to name a few.
What’s increasingly common is when a chain goes bust a rival retailer or private equity firm snaps up the intellectual property rights so they can own the brand and sell it online.
They may go on to open a handful of stores if there is customer demand, but there are rarely ever as many stores or in the same places.
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