U.K consumers bracing for higher taxes from budget

UK consumers are bracing for higher taxes from the upcoming budget and the finance minister’s recent warning of shared pain to come, risks weighing on key Christmas demand, the boss of retailer Marks & Spencer said on Wednesday.

In the speech on Tuesday, UK finance minister Rachel Reeves signalled that the Labour government could break a pre-election pledge not to raise one of the three major taxes and said “we will all have to contribute” at the November 26 budget.

Consumers are now bracing for a fresh hit to their spending power from tax rises, compounding worries over the cost of living following years of high inflation, and prompting business leaders to amplify their warnings.

“Our customers are increasingly concerned about rising costs and higher taxes, and they’re worried about the budget,” CEO Stuart Machin told reporters on Wednesday.

CUSTOMERS ‘MORE WORRIED’ FOLLOWING REEVES SPEECH

“They did get more worried following yesterday’s speech,” he said, adding that the company had carried out an immediate phone survey of a pool of customers after Reeves spoke.

December is the key trading period for most UK retailers when they make a chunk of their profits and there are fears the timing of this year’s budget, a month closer to Christmas than last year, could constrain the festive spending.

Machin said M&S, which sells food, clothes, homeware and beauty, and has over 1,000 stores in Britain, expected a “good” Christmas, but he said the budget concerns could hit spending.

“(Shoppers) might be planning for a good Christmas, but they’re also planning for the worst when it comes to the budget,” he said.

Reeves is under pressure to increase taxes to fill a shortfall of tens of billions pounds, one year after she hiked levies on companies to fix the public finances – a policy that enraged corporate bosses.

REEVES CALMED BOND MARKETS NOT CUSTOMERS

“The presentation (by Reeves) may have calmed the bond markets, but it hasn’t really calmed our customers,” Machin said, after M&S posted lower profits due to a cyber attack.

George Weston, the head of the company which owns fast fashion chain Primark – Associated British Foods told Reuters on Tuesday that the last budget had left “scar tissue”.

“Consumer sentiment dropped significantly after last year’s budget, I hope it doesn’t do so again,” he said.

The boss of Tesco has also warned that companies cannot shoulder any more pain and British pub chain JD Wetherspoon warned on Wednesday that the industry cannot cope with any more tax increases or higher wage costs after it reported a slowdown in recent sales growth.

British retailers reported another drop in sales in October and they expect a further fall in November as consumers worry about the budget, a survey late last month showed.