Major retailers set to increase food prices after Rachel Reeves' budget

Marks & Spencer are set to unveil their half-year earnings on Wednesday, and J Sainsbury will release their interim results the following day.

Industry sources said the pressure on pricing would be "intense" given the thin margins on which the big supermarkets already operate.

"Food price increases from next April are inevitable," another source said.

The warning comes after Reeves said: "businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth".

Reeves did not highlight the prospect of higher prices at the tills, when speaking with Sky News, however some retailers are considering whether to explicitly blame the government for the impending price increases - a move which will trigger renewed inflation in the UK economy.

Reeves, has announced that National Insurance will go up for employers from April 2025. Employers are required to make separate National Insurance contributions on the earnings of their employees which will not be taken out of the employee’s pay.

The employers’ National Insurance rate is going up from 13.8 per cent to 15 per cent, and employers will start paying National Insurance on more of an employee’s earnings, with the threshold reducing from £9,100 to £5,000.

Even though the Government hasn’t increased National Insurance rates for workers, it is rumoured that workers will still be affected by this change.

Employers’ costs will increase because of the hike in National Insurance and minimum wages. This could lead them to hire fewer people or offer lower pay increases.

The grocery industry is expected to be among the hardest hit by the changes to employer NICs, particularly after the chancellor slashed the threshold to just £5,000.

Primark's parent, Associated British Foods (ABF), will be the first major retailer to report financial results since the budget on Tuesday.

Insiders downplayed the risks of price hikes from Primark given its track record of absorbing inflationary pressures without passing them on to consumers.

ABF's additional employer NICs bill is expected to be in the region of £25m, according to one analyst. Overall, the retail sector could end up paying billions of pounds of additional tax given the scale of its workforce.

Farmers are among the businesses facing steeper employment costs following an increase in the minimum wage as well as an increase in employer NICs.

The Lea Valley Growers Association (LVGA), whose members grow three-quarters of Britain’s cucumber, aubergine and sweet pepper crop, said higher costs “cannot be absorbed by growers so will be passed on to shoppers”.

Lee Stiles, from the LVGA, said: “Prices for next year had already been agreed with supermarkets prior to the Budget. However, these will now have to be revisited.”

He said wages were the biggest overhead cost for farmers, meaning Reeves’ decision to increase the cost of employing workers would necessarily impact prices.

Stiles said: “The additional tax burden imposed by the Government could result in prices rising for cucumbers, tomatoes, peppers and aubergines by an additional 10-20per cent.”

It raises the prospect that the price of a loose aubergine or a cucumber could go up by 20p in supermarkets, while packs of peppers could rise by 35p.