Chancellor Rachel Reeves today delivered Labour’s first Budget in nearly 15 years. But what was in there for retail, and how has the sector reacted?
Stepping up to the dispatch box in the House of Commons for the first time as chancellor, Reeves said today’s Budget would be the beginning of a decade of “national renewal”.
Pledging to put “more pounds in people’s pockets” and improve flagging living standards, Reeves said the only way for her and the government to drive growth in the UK economy was to “invest, invest, invest”.
While Reeves got a lot of mileage out of the fiscal legacy bequeathed to Labour by the Conservatives, the details of today’s Budget will see taxes rise by £40bn.
But despite efforts to paint the situation as dire, and for all the talk of it being a reformative budget of change, Labour’s first offering hasn’t been met with universal praise by the retail sector. British Retail Consortium chief executive Helen Dickinson said that retailers have been left “counting the costs”.
What was in the Budget that will most affect the retail sector, and how has the sector reacted?
NI Contributions
One of the biggest revenue raisers in the Budget was on national insurance – with Labour raising contributions by employers by 1.2 percentage points to 15% from April 2025.
Reeves also unveiled plans to reduce the secondary threshold when contributions fall from £9,100 to £5,000 – saying the measures would raise £25bn a year by 2030.
Despite this, Reeves went to great lengths to say that it wouldn’t be employees left paying more, but employers. On the same day as the Budget, Labour announced it had accepted the recommendations of the Low Pay Commission to increase the national living wage to £12.21 in April 2025.
Co-op Group chief executive Shirine Khoury-Haq urged the government to go further on reforming national insurance despite the “significant impact” it will have on the business.
”We would urge the Government to follow through on its commitment to removing age rates within the National Living Wage and to consider removing the separate apprenticeship rate. At Co-op, we pay the Real Living Wage to all colleagues, regardless of age or apprenticeship status, reflecting our belief in fair pay for all.”
Chief executive of the Retail Trust Chris Brook-Carter welcomed the increase in pay for those on minimum wage, saying: “Increases to the national minimum wage and national living wage will also support many people across the retail sector by giving them the pay raise they deserve.”
Some have also noted the potential uptick that news of wage rises could give a boost to “consumer confidence”, which has been notably low, with many individuals concerned about their personal finances,” according to Alvarez & Marsel managing director and head of retail and consumer Erin Brookes.
Some in the sector, however, have warned that changes to employer NI contributions, combined with the increase in minimum wages, will heap added pressure on businesses – particularly small business owners.
The Association of Convenience Stores said the combined cost to the sector of the minimum wage rise and NI contribution changes would exceed £8bn a year.
“Local shops will face significant new pressures as a result of today’s Budget,” said ACS chief executive James Lowman, adding: “The cold hard facts are that the measures announced in the past 24 hours have added two-thirds of a billion pounds to the direct cost base of the UK’s local shops.
“At a time when trade is tough and operating costs are stubbornly high, this will be challenging for our members to absorb and there will be some casualties on high streets and in villages and estates across the country.”
The national president of the Federation of Independent Retailers Mo Razzaq summed up the Budget as being one of two halves.
“While there were some gains, there was also some pain for independent retailers at a time when our finances are being stretched to the limit.”
Reforms promised
Reeves also promised that relief would be coming for retail’s great white whale: business rates. However, the sector will have to wait a little bit longer. She promised that from 2026, business rates will be reformed.
For the time being though, retailers will have to make do with a business rates discount of 40% – down from the current 75% on a maximum of £110,000. This means that many businesses will see their business rates contributions double, as opposed to quadruple.
The BRC’s Dickinson said: “While retailers welcome future action on rates, they are assessing the impact of today’s announcement. There remain many unanswered questions about the new charges and discounts that will be levied from 2026. Charging more to businesses with higher rateable values may punish not only distribution hubs, but also larger stores, which play a key role in attracting footfall to high streets and town centres.
“With retailers paying over 21% of all business rates in the economy, the solution is not to simply shift the burden around, but to look outside retail to address the disproportionate impact of business rates on the industry.
RSM UK head of leisure and hospitality Saxon Moseley said: “Promises of business rates reform in 2026 will be welcomed but need to be set against a real terms 140% increase in next year’s rates bill for small businesses resulting from the existing relief being reduced.”
Knight Frank head of business rates Keith Cooney was less sanguine. “The £29bn business rates tax burden is set to increase again for 2025 with the largest ratepayers – which will include many of the country’s top employers – being asked to effectively fund any support for small businesses”.
Action on crime
In her Budget statement, Reeves called out by name both the British Retail Consortium and the shopworkers union Usdaw for their advocacy and work on the damage done to retail businesses by the ongoing epidemic of crime and violence against shop workers.
Reeves said: “I am providing additional funding to crack down on the organised crime, which targets retailers and to provide more training to our police officers and retailers to stop shoplifting in its tracks.”
Co-op’s Khoury-Haq welcomed the announcement, and said she hoped it would make a real difference to staff who have grown weary of facing constant threats and abuse.
“I welcome the chancellor’s recognition today that persistent theft and retail crime has an incredibly damaging impact on colleagues across the retail sector and communities alike. At Co-op, we have long campaigned against rising violence and abuse directed at shopworkers, so we’re hopeful that the removal of the £200 threshold alongside new funding will make a real difference in tackling the repeat offenders and organised gangs driving retail theft.”
Brook-Carter said that the retail sector “welcome(s) with open arms the new funding being announced to crack down on retail crime and provide more training to police officers to help better tackle this issue”.
“The chancellor’s commitment to tackling shop theft will be warmly welcomed by our members,” said the ACS’ Lowman. “But they are interested only in action and in crime against their stores and their colleagues being tackled effectively. We stand ready to help implement a new, and better-funded strategy to stop shop theft, abuse and violence against our members.”
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