Leaders from the UK’s retail and hospitality sectors, including executives from Marks & Spencer and Sainsbury’s, met with Chancellor John Healey at No 11 on Tuesday to discuss rising employment costs. Industry chiefs are advocating for a policy shift in the upcoming budget to help support youth hiring and ease inflationary pressures on the high street. The chancellor heard from sector leaders – including the boss of Marks & Spencer, Stuart Machin, and Sainsbury’s chief executive, Simon Roberts – about the impact of the rise in emp, at the No 11 event on Tuesday morning. Including Tesco, Costa Coffee and the Co-op, have met John Healey to urge him to cut the cost of employing young people in his first budget, some of the UK’s biggest retailers and hospitality businesses.
A primary concern for these businesses is the current national insurance contributions (Nics) threshold. They are calling for a partial reversal of the policy introduced by the Chancellor’s predecessor, Rachel Reeves, who reduced the earnings threshold at which firms begin paying Nics from £9,100 to £5,000 annually. Retailers are requesting that this threshold be raised to £6,000, suggesting that the lower limit has contributed to a decline in job opportunities for younger workers and part-time staff.
Helen Dickinson, chief executive of the British Retail Consortium, highlighted that the retail industry remains a vital source of national growth and investment. She warned that the sector has faced a 20% tax increase over the past two years, including an additional £6.5bn in employment costs, which she argues could force businesses to pass expenses to consumers or limit job creation. “But after whacking up retailers’ taxes by 20% in two years, including an extra £6.5bn in new employment costs, any new costs will be paid by consumers at the till and make it harder for retailers to create jobs.
Following the meeting, sources indicated that industry leaders felt encouraged by the Chancellor’s reception to their concerns. Retailers are also seeking relief regarding business rates, with some expressing optimism that the government is open to addressing both employment and property tax burdens to stimulate growth.
Outside of employment taxes, the government is navigating intense pressure regarding capital gains tax (CGT). Economists have suggested that aligning CGT rates with income tax could generate £11.3bn for the treasury, a move previously described by Defence Secretary Wes Streeting as a “wealth tax that works.”
Despite this interest, reports suggest the Chancellor has distanced himself from full equalisation over fears it could harm inward investment. While ministers such as Louise Haigh have previously advocated for bringing CGT rates closer to income tax, the Treasury remains cautious.
In 2024, the government raised CGT rates to 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, though these remain significantly lower than standard income tax rates of 20%, 40%, and 45%.
A Treasury spokesperson stated that tax decisions remain the sole responsibility of the Chancellor, to be unveiled during official fiscal events, and declined to comment on ongoing speculation regarding specific proposals.
As the budget approaches, the government faces a balancing act between funding essential public services and infrastructure while responding to the needs of major employers who warn that further cost hikes could stifle retail recovery.
