The company said it is facing “higher costs” from taxes such as National Insurance while outlook for economic growth, inflation and interest rates is uncertain. Meanwhile, Tesco confirmed that larger National Insurance contributions announced in the autumn Budget will add £250m per year to its business costs. The costs of higher wages and National Insurance tax changes coming in April will be passed on to consumers.
The overall sentiment from customers does remain flat and this sentiment was echoed by the bakery chain Greggs which said in a trading update that lower consumer confidence continues to hit High Street footfall and expenditure.
Inflation
The forecast is that food price inflation would rise from 1.8% last month to 4.2% in the latter half of this year, and that price rises will continue for vegetable oil, orange juice, butter, and coffee. Overall shop prices, which have been falling, will start rising again. The Treasury said the independent Office for Budget Responsibility had forecast that food inflation will stay below to 2.2% this year.
Following the autumn Budget, the National Living Wage for over 21s would increase from £11.44 to £12.21 an hour from April and that employers’ National Insurance contributions would rise from 13.8% to 15%. Retailers hit back, warning in November that higher wages and taxes would make job cuts “inevitable”, and lead to price rises and shop closures.
Meanwhile, discount retailer B&M said in an update that it’s like-for-like sales in the UK had fallen by 2.8% in the three months to 28 December. It also lowered the top end of its annual profit forecast. B&M’s share price plunged by 8.5%.