Labour’s relationship with business at a ‘critical point’, retail boss warns

If a week is a long time in politics, then four months in retail is a lifetime.

When Helen Dickinson, the chief executive of the British Retail Consortium (BRC), last sat down with City AM in late July, she could hardly have been more effusive in her praise for the incoming Chancellor and her business counterpart Jonathan Reynolds.

“The early signs are really positive,” Dickinson, who has been at the helm of the BRC for over a decade, said then of the fledgling government’s lines of communication with her sector. “They invested a huge amount of time before the election to engage with businesses of all shapes and colours, including retail.

“I think that having fresh people with curiosity… and an optimistic agenda sounds fantastic. [And] a lot of the things that retail… has been passionate about for a long time were in the manifesto.”

But as we meet less than than half a year on, that glowing and optimistic tone is conspicuously absent.

On Monday, the BRC, which represents over 200 of the UK’s largest retailers, sent a letter to the Chancellor, warning that the changes announced in last month’s Budget – taken alongside other planned reforms from the government – were set to cost the sector £7bn annually.

The letter signed by over 80 high street titans – including the likes Tesco, Currys and Primark – made painstakingly clear what the ill effects of this higher cost base were: job losses would be “inevitable” and higher prices “a certainty”.

“The letter highlights the strength of feeling from right across the industry,” Dickinson tells City AM. “You can see that businesses large and small are aligned on the concern for the consequences of a whole load of policy changes – not just ones that happened in the Budget – that are all happening at the same time.”

Chief among those changes is the reforms that Chancellor Rachel Reeves has announced to employer National Insurance contributions (NICs).

Raising the marginal rate from 13.8 per cent to 15 per cent was set to cost the sector £570m a year, wrote the the signatories, who ranged from mass market retailers like Greggs and Primark right the way through to the paragons of luxury that are Burberry and Swarovski.

The letter highlights the strength of feeling from right across the industry

But far more consequential, they continued, were the changes made to the threshold at which employers needed to start paying the tax. The effect of this ostensibly unremarkable change, which brought the level that NICs kick in at down from £9,100 to £5,000, would be “particularly acute” on retailers due to their propensity to employ part-time and entry-level staff. The BRC estimates that small change will cost retailers £1.76bn annually.

“It’s the big move in the threshold… that really had the most startling effect, and where it disproportionately impacts our industry,” Dickinson says. “And this lands across the breadth of the retail sector. Whether they’re in big businesses or small businesses, a lot of people are on part time, flexible work.”

A ‘confluence’ of grey clouds for retail

Their multibillion pound impact notwithstanding, the NICs changes would not be nearly as unpalatable were they taken in isolation, Dickinson says.

Far more important, and worrying, for the retail chief is the confluence of storm clouds that are gathering on her members’ horizons.

Dickinson’s letter warned of an estimated £2bn hit from the government’s packaging levy. The tax, set for introduction in October 2025, just four months on from the NICs hike, will look to fund investment in UK recycling, taking the burden off councils through taxing businesses by the type of packaging they use.

This combined with NICs and the above-inflation rise to the National Living Wage announced in the Budget, which will add a further £2.7bn to retailers’ costs, is what has prompted such a robust appeal from those in retail.

“I think what the letter is trying to highlight,” she says, “is the cumulative effect of how all of these things landing within a short time scale is having on the sorts of decisions that these businesses are needing to make.

“The risk is, if you move too quickly on certain things, you end up with unintended consequences.”

This cautionary air carried through to Dickinson’s early assessment of the government. While some of her counterparts have been excoriating in their criticism of the new administration – UK Hospitality’s Kate Nicholls has referred to a “world of pain” being imposed on her sector, and the CBI’s Rain Newton-Smith accused the government of imposing policy on businesses as opposed to designing it with them – Dickinson is more measured when asked how to rate the government’s early months.

“I think the jury is out,” the longstanding boss says. “We are highlighting some concerns, and it really depends what happens from here… and whether we can navigate our way through to find a better outcome.”

Dickinson says she remains “hopeful” that such an outcome can be reached. But not optimistic enough, it appears, to refrain from ending our interview with a parting shot that would have been unimaginable just four months ago. “We are at a critical point in order to try and achieve that outcome,” she says, “given the strength of feeling which caused 80 companies to sign our letter.”