While there is some mitigation for independents, there will also be casualties within the UK convenience sector as local shops face an additional £666m in costs as a result of today’s Budget, warned the Association of Convenience Stores (ACS).
The impact will be felt unevenly across the UK’s 50,000 convenience stores, with some measures such as the increased employment allowance mitigating costs for smaller independent stores, while providing no help for chains and larger independent businesses, observed ACS.
Meanwhile, the Scottish government will receive an extra £3.4bn through the Barnett formula.
The key measures for UK local shops announced by the Chancellor, and the costs for local shops associated with them, are:
National Living Wage to increase to £12.21 per hour
National Minimum Wage (18-20 rate) to increase to £10 per hour
Cost to the convenience sector next year: £7.739bn (increase of £513m)
Employers’ National Insurance Contributions to rise to 15%
Threshold for Employers’ National Insurance contributions to fall to £5,000 per year
Employment Allowance to rise to £10,500 a year
Cost to the convenience sector next year: £397m (increase of £85m)
Retail and hospitality rate relief in England (this is a devolved issue in Scotland) reduced from 75% to 40%
Small business multiplier frozen for 2025/26
Cost to the convenience sector: £267m (increase of £68m)
ACS Chief Executive James Lowman said: “The cold hard facts are that the measures announced in the past 24 hours have added two-thirds of a billion pounds to the direct cost base of the UK’s local shops. At a time when trade is tough and operating costs are stubbornly high, this will be challenging for our members to absorb and there will be some casualties on high streets and in villages and estates across the country.
“Not all shops will be impacted the same. The smallest retailers, with low NICs bills and lower rateable values for their shops, will benefit from the welcome increase in the employment allowance and the retention of 40% of the retail, hospitality and leisure business rates relief. Retailers with a larger store, a number of sites or those operating a chain will receive limited benefit from these mitigations, and this will impact their ability to invest and to continue to offer services in the communities they serve.”
The following additional measures were announced by the Chancellor in the Budget speech today:
- Flat rate levy on vaping liquids from October 2026 of £2.20 per 10ml
- The duty rate on all tobacco products will increase by the tobacco duty escalator of 2% above Retail Price Index (RPI) inflation.
- The duty rate for hand-rolling tobacco will rise by an additional 10%, to 12% above RPI inflation.
- Fuel duty frozen and the 5p cut extended for another year
- Tax on non-draught alcoholic drinks to increase by the higher RPI measure of inflation
- A new commitment to tackling shop theft in England and funding directed to tackling organised gangs
Lowman added: “The Chancellor’s commitment to tackling shop theft will be warmly welcomed by our members, but they are interested only in action and in crime against their stores and their colleagues being tackled effectively. We stand ready to help implement a new, and better-funded strategy to stop shop theft, abuse and violence against our members.”
The Scottish Retail Consortium (SRC) added that the Budget increased pressure on Scotland’s retailers.
SRC Director David Lonsdale said: “Scotland’s retailers will face a £190 million increase in their tax bill following the Chancellor’s announcement that employer national insurance contributions are to rise. Combined with increases in the statutory wage rates it’s clear retail businesses will see big rises in the cost of employment, whilst there was little sign of any significant reform to non-domestic rates. Such stark increases will increase the cost of operating a retail business and are unlikely to be absorbed by businesses, at a time when Scottish retail sales are flatlining, making it likely those costs will be passed along to consumers.
“The update on the economy brought little sunshine. Economic growth is only predicted to rise to two percent at best before easing back, whilst it will be 2029 before inflation returns to beneath the two percent target. That implies little rise in household disposable incomes, further increasing the challenge for retailers looking to grow their businesses.
“Retailers’ will now turn their attention to the Scottish Budget, with the devolved government due to receive substantial sums in Barnett Consequentials. With little fiscal headroom of their own retailers will hope to see action to blunt any rise in non-domestic rates and an end to the mooted introduction of a business rate surtax on grocers. After being thwacked by additional employment costs in the Chancellor’s Budget retailers deserve to be spared any further tax rises by Scotland’s Finance Secretary in December.”
