The British Retail Consortium has written to chancellor Rachel Reeves warning that her national insurance raid in the recent Budget will inevitably lead to job losses in the sector and an increase of prices for consumers.

The draft letter, first seen by Sky News, says changes to national insurance set out by Labour last month will add some £2.5bn to the retail industry’s annual tax bill, stoking inflation and costing jobs as a result. 

“The sheer scale of new costs in the Autumn Budget and the speed with which they occur, together with costs from a raft of other regulation, create a cumulative burden that will make job losses inevitable, and higher prices a certainty,” the draft letter said. 

In the letter, the BRC goes on to estimate that changes to national insurance contributions would increase retail’s tax budget by £2.3bn annually – three-quarters of which would come from changes to the earnings threshold which was dropped to £5,000 from £9,100.

The BRC also said that the business rates reforms proposed at the Budget were not enough to offset the extra costs imposed on its members at the Budget.

“Retail is a highly competitive industry, and retailers’ margins are low,” the letter added. “Before the Budget, the industry was paying 55% of profits in business taxes, the highest effective tax rate, along with hospitality, of all industry sectors.

“It will not be possible for businesses to absorb such a significant increase to their cost base over such a short timescale.

“The effect will be to increase inflation, reduce jobs and pay growth, especially at the entry level, and bring investment down.

“We are already starting to take difficult decisions about investment in our businesses and this will be true right across the industry and its supply chain.”

The letter echoes the thoughts of many retail leaders who have spoken out against the proposals over recent weeks.

BRC and JD Sports chair Andy Higginson added his voice to the growing chorus yesterday, saying the changes will lead to “significant inflation in prices”.

Higginson called on the government to “phase” in the national insurance and minimum wage increases for businesses “over the next two to three years”, rather than all in one go from April next year.

“We just need to make sure that the immediate impact of all these things doesn’t come in one big lump and that the economy has time to absorb these changes in a way that doesn’t fuel inflation,” Mr Higginson told the BBC’s Today programme.

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