Kingfisher, a prominent British home improvement retailer, has reported adverse effects stemming from U.K. Finance Minister Rachel Reeves’ latest budget, as she readies for her upcoming update on the economic situation of the nation.
In its annual earnings report released on Tuesday, Kingfisher, which operates popular chain B&Q, stated that the government’s financial strategies “have raised costs for retailers and affected consumer sentiment,” leading to a decline in sales of higher-priced items.
This announcement adds to a growing list of British businesses expressing dissatisfaction with Reeves’ tax-increasing budget initiated in the autumn. Companies are now anticipating her Spring Statement, which is scheduled to reveal her latest spending and taxation proposals at 12:30 p.m. London time on Wednesday.
Among the primary concerns voiced by businesses is the financial strain of increased employment costs following the government’s commitment in October to hike national insurance contributions for employers, alongside a substantial 6.7% rise in the national living wage set to take effect on April 1.
Reeves defended these tax increases in a statement on Sunday, telling Sky News that the government “took necessary actions to ensure our public services and public finances are on solid ground.”
Yet, several consumer-oriented businesses have raised alarms regarding the economic policies of the Labour government in their recent financial disclosures. Supermarket giant Tesco highlighted that its increased contributions to national insurance could lead to an additional £250 million ($324 million) in costs annually. Meanwhile, JD Wetherspoon’s chairman, Tim Martin, noted that the new regulations could impose an additional £1,500 weekly expense on each of his pubs.
Regis Schultz, CEO of sportswear retailer JD Sports, echoed this sentiment, indicating that such policies might tempt businesses to cut back on staff and working hours, a move that could have detrimental effects on the economy.
This corporate criticism emerges as the U.K. grapples with sluggish economic growth, escalating prices, and extensive uncertainty fueled by U.S. President Donald Trump’s global trade tariffs.
The Office for Budget Responsibility (OBR), the independent financial oversight body, is reportedly preparing to reassess U.K. growth forecasts for 2025, with predictions being revised down from an earlier estimate of 2%.
AB Foods, which oversees the budget fashion chain Primark, also pointed to the Labour government’s budget as a contributor to waning consumer strength across the country. Finance Director Eoin Tonge stated that consumers are exhibiting caution, driven by “a shock and a fear, that’s causing people to reduce spending.” This sentiment was reflected by clothing retailer Frasers Group, where Chief Financial Officer Chris Wootton remarked to Reuters that the company felt “like we’ve been kicked in the face” following the budget announcement.
This wave of negative feedback from companies is likely to intensify the scrutiny on Reeves as she approaches her Spring Statement.
The British Retail Consortium has urged the government to foster “confidence in the economy,” warning that the tax increases set for April, along with the minimum wage hike, will impose £5 billion in additional costs on retailers, many of whom may have no choice but to increase prices.
The Confederation of British Industry (CBI) emphasized the need for Reeves to “instill a serious confidence boost in businesses” during her upcoming statement.
“As an urgent priority, the government should commit to not further increasing the business tax burden over the remainder of this Parliament,” stated Louise Hellem, chief economist at the CBI. “Setting ambitious goals for R&D spending, facilitating investments in skills, and taking measures to ease regulatory pressures on businesses would be welcomed moves that demonstrate the government recognizes what businesses need from them.”
Goldman Sachs Chief Equity Strategist Peter Oppenheimer remarked on Monday that mounting concerns regarding consumer and business confidence might steer Reeves toward focusing on expenditure reduction rather than tax hikes this week. He added that the government’s objective of stimulating growth is “a commendable aim, albeit a difficult challenge.”
Finance Newso has reached out to the U.K. Treasury for further comments.
— Finance Newso’s Holly Ellyatt contributed to this report.
