UK Retailers Seek Tax Relief in Budget as Consumer Pressures Mount, Bernstein Says

UK retailers are intensely lobbying the government for tax relief ahead of the October 28 Budget, as the sector grapples with significant tax burdens and mounting pressure on consumer spending, according to an analysis by Bernstein.

The Burden of Business Rates

A primary focus for retailers is business rates, a tax on commercial property that Bernstein notes is one of the largest components of their tax bills, often exceeding profit tax. Major retailers have faced substantial costs, with Bernstein reporting payments in the 2025/26 fiscal year of £736 million for Tesco, £425 million for Sainsbury’s, and approximately £180 million for Marks & Spencer.

The British Retail Consortium (BRC), the industry's trade body, is advocating for a freeze on the inflation-linked increase in business rates. Echoing these concerns, M&S Chief Executive Stuart Machin has argued that while retail constitutes about 5% of the UK economy, the sector pays over a fifth of all business rates, according to the source.

Potential Budget Scenarios

Bernstein has outlined three potential outcomes for retailers concerning business rates in the upcoming Budget:

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• No change: The government could maintain the current structure, potentially applying a higher multiplier only to certain non-retail properties like high-value offices.
• Best case: Retail properties could be exempted from the highest multiplier, providing significant relief to the sector.
• Worst case: A higher top multiplier could be applied to all commercial properties, including retail, increasing the tax burden further.

National Insurance and Consumer Health

Beyond business rates, retailers are also concerned about employer national insurance contributions. An April 2025 policy change, which raised the employer rate to 15% from 13.8% and cut the pay threshold, particularly affected firms with many entry-level and part-time staff. The BRC has proposed raising the threshold to £6,000 to alleviate some of this pressure.

This lobbying comes as the UK consumer faces growing economic strain, a trend Bernstein expects to intensify with rising fuel and food inflation. Recent market updates reflect this pressure, with Next lowering its UK guidance for the second half and Sainsbury’s reporting a miss on second-quarter like-for-like sales. Bernstein suggests the Budget will likely include measures to boost consumer spending, such as energy bill support, changes to income tax thresholds, or a freeze on fuel duty.