The boss of Aldi has warned Chancellor Rachel Reeves that tax hikes in her Autumn Budget – taking place this year on 26 November – could result in a food price surge ahead of the festive season.
Highlighting the fact that National Insurance rises and new packaging regulations had already “rippled through to prices on the shelf edge”, Giles Hurley, chief executive of Aldi UK, told the BBC: “Any policies which affect the operating costs of business should be considered very, very carefully because of the very real risk they find their way… back into the food system and onto prices.”
Hurley’s warning comes as Aldi’s profits dropped by more than a fifth to £435.5m, despite sales increasing to £18.1bn. The company said this was largely down to investment in price cuts, infrastructure and higher pay. However, Hurley said that the company has spent more than £300m this year in trying to offset the rising cost of goods in order to keep its prices low. Acknowledging that global factors have had a major part to play in food inflation, he suggested that domestic policy decisions have, “perhaps inadvertently”, exacerbated the issue in the UK.
Government policy driving food inflation
Last month, 60 CEOs of major UK retailers – including Giles Hurley – wrote to the Chancellor, urging her to avoid further taxes on the industry in the Autumn Budget. Their letter warned that recent government policies – including the changes to employer National Insurance, National Living Wage increases, and the new packaging tax – have already added £7bn in costs to the sector, with a knock-on effect in job losses and falling investment. The letter called on the Chancellor to reduce business rates for Retail, Hospitality & Leisure, and asked for no store to pay more under any new tax multiplier.
Nonetheless, it’s widely expected that the Budget will contain tax hikes, as the government attempts to plug a multi-billion gap in public finances, created in part by sluggish growth and high inflation. Reeves is under pressure to achieve this without breaking Labour’s manifesto promise of not raising headline rates of income tax, National Insurance or VAT. She has hinted at “difficult decisions” ahead and acknowledged the need for “honesty” about tax rises.
The Food & Drink Federation (FDF)’s latest forecast reveals that food inflation is set to rise to 5.7% by December 2025, before slowing to 3.1% by the end of 2026. It is currently tracking ahead of general inflation (4.2%) at 4.9%, up from 1.3% in August 2024, according to FDF data. Since 2023, UK food inflation has been consistently higher than that of comparable European economies, with higher energy costs and trading costs related to Brexit pushing up prices.
However, the FDF report points to government regulation as “the main driver” of UK food inflation. As well as additional NI and packaging costs, retailers are dealing with a higher cost of labour, thanks to a 69.6% rise in the National Minimum Wage between 2016 and 2025. The Employment Rights Bill that comes into effect in 2026 and 2027 is also expected to raise labour costs significantly.
The cost of Christmas
Christmas adds a significant chunk onto the average household’s spending. Research by Nimblefins estimates that Christmas 2024 cost the average household £719, with food and drink coming in at around £350 of that. With food inflation already running high and further tax hikes looming, UK households face a tough festive season – and if additional business costs are passed down the supply chain, shoppers could see price rises on everyday essentials just as they begin preparing for Christmas. For many, this could mean cutting back on seasonal treats, festive meals, or even gifts – adding financial strain to households, and causing a significant problem for retailers who look to holiday season to boost their coffers.
With the Autumn Budget looming and food inflation already outpacing general inflation, retailers and consumers alike will be watching closely to see whether the Chancellor heeds industry warnings – or risks a festive food price surge that could see British households and retailers set for a gloomy Christmas.
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