Asda customers are warned they will face higher prices after Labour’s Budget tax changes will cost the supermarket chain £100m.
Lord Stuart Rose, who currently leads Britain’s third-largest supermarket, said the National Insurance changes announced in the Budget would force the retailer to examine all aspects of its business.
Asda, which employs 130,000 people, said the tax changes could impact both customer prices and its ability to maintain staff numbers and wages.
Rose explained that National Insurance made up the bulk of the £100m in added costs from the Budget, which he said “taxed more heavily than we thought and in more places.”
He said, “we don’t have a magic money tree” as he cautioned that prices will have to rise.
Asda supermarketGETTYThe tax changes will also affect the company’s ability to compete and maintain current price levels for customers.
“We are a very heavily taxed industry and retail is the largest employer in the private sector, three million people,” he said.
The measures come as part of Labour’s attempt to close the black hole in the public’s finances. This tax change is expected to raise £25.7bn for the Exchequer.
Rose added: “You cannot absorb £100million of cost,” confirming that price rises would be inevitable.
Michael Gleeson, Asda’s finance director, reinforced this position, saying: “It will undoubtedly lead to some price rises.”
Rose emphasised the challenging nature of the retail sector, noting: “Our industry is very efficient but we work on incredibly tight margins. You are dealing with very large numbers and very high sensitivity.”
The company said it would examine what costs it could afford to absorb and how much would need to be passed on to customers.
The tax warning comes as Asda faces broader business challenges, with sales excluding fuel falling 2.5 per cent to £5.3bn in the three months to September.
Like-for-like sales plunged by 4.8 per cent during the same period, though this marked an improvement from the 6.4 per cent drop in the previous quarter.
The retailer recently announced 475 management job cuts at its Leeds and Leicestershire offices as part of a restructuring effort.
The chain is currently without a permanent chief executive following Mohsin Issa’s departure in September, with Rose serving as interim leader while a search for a replacement continues.
Asda is not alone in warning about the Budget’s impact, with rival Sainsbury’s forecasting a £140m hit from the national insurance changes. Other major retailers have also highlighted concerns about the tax measures.
Marks & Spencer has indicated the changes will cost them £60m, with this figure set to increase further due to rises in the national living wage.
The impact has already been felt in the stock market, with several retailers seeing their share prices fall as investors digest the implications of the Budget changes.
M&S shares dropped 4.5 per cent, while JD Sports fell 2.7 per cent and Tesco declined 2.5 per cent.