Sainsbury's Faces £140 Million Hit from National Insurance Hike, Warns of Rising Inflation

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Sainsbury's, one of the UK’s largest supermarket chains, is facing significant financial challenges following recent budget measures that will add a £140 million burden to its operating costs. Chief Executive Simon Roberts warned that this increase, stemming from the hike in employers' national insurance contributions, is likely to lead to further inflation and potentially tough choices for the company.

 

Roberts noted the financial strain that the increased national insurance contributions will impose, saying, "This impact on national insurance was unexpected and is coming in fast, it will have a very significant impact, it will impact our costs base... and our suppliers' cost base." This unexpected financial weight will come into effect in April, following Chancellor Rachel Reeves' announcement in last week’s budget.

 

The Sainsbury’s CEO expressed concerns about the inflationary impact of these new costs, noting that they are beyond what the company can absorb. "There’s a barrage of costs," he said, highlighting that Sainsbury’s customers might ultimately bear the financial brunt of these changes. Roberts pointed to the analysis of the Office for Budget Responsibility (OBR), an independent forecaster, which suggested that Reeves’ budget measures will drive inflation higher than originally anticipated. "It’s difficult to disagree with" the OBR’s assessment, Roberts added.

 

In addition to the national insurance increase, the new budget also raised the national minimum wage, another factor contributing to overall cost increases. While Roberts did not put a specific number on how much these changes would inflate prices, he acknowledged the growing pressure, saying, "There’s a lot of pressure in the pipeline... there’s pressure in the system in inflation already."

 

Roberts expressed disappointment over the budget's impact on business rates as well. Many businesses had anticipated a reduction in these rates, but instead, they are now expected to rise next year. Roberts commented, "Business rates will go up this year. I certainly didn’t expect them to go up next year; I expected them to go down."

 

As for the potential impact on Sainsbury’s workforce, Roberts stated that it is "too early to be specific," but he acknowledged that "difficult decisions" would likely have to be made. Although he did not elaborate on whether these decisions could involve staffing changes, he hinted that the combination of rising national insurance, minimum wage costs, and other pressures may lead to unavoidable adjustments in operations.

 

Sainsbury’s is not alone in dealing with the implications of the new budget. Other major UK companies have reported similar concerns. JD Wetherspoon, the pub chain with more than 1,000 establishments, announced that the budget measures would increase its costs by £60 million next year. Marks & Spencer, another prominent UK retailer, expects to see a £120 million impact on its finances. These announcements highlight the widespread concerns across the retail and hospitality sectors, which are grappling with the same financial pressures as Sainsbury’s.

 

Based on a report by Sky News 2024-11-09