Reeves Warns: Tax Hikes Could Boost Prices as Budget Day Nears

The Impact of Taxes on Grocery Prices

Giles Hurley, the CEO of Aldi, has raised concerns about the potential consequences of higher taxes on food prices in the UK. His remarks come as the supermarket chain reported record sales of £18 billion in the UK and Ireland for the first time last year. Hurley emphasized that the government should be cautious when considering policies that could increase the cost of living for consumers.

He stated, “We would encourage the Government to adopt policies which don’t inadvertently add to the costs of businesses in the food sector.” He further explained that any policies affecting business operating costs need to be evaluated carefully because they could lead to higher prices for consumers.

Hurley pointed out that recent increases in employer National Insurance Contributions and a new packaging levy have already contributed to rising prices on store shelves. He also noted that shoppers are still struggling with inflation, which remains stubborn and continues to impact their purchasing power.

The Food and Drink Federation (FDF) has warned that food inflation could reach 5.7% by Christmas, up from 4.2% in August. This highlights the ongoing challenges faced by both retailers and consumers in the current economic climate.

Financial Performance and Market Position

Despite these challenges, Aldi reported £18.1 billion in sales last year, slightly up from £17.9 billion in 2023. However, profits fell by approximately 20%, dropping from £552.9 million to £435.5 million. This decline was attributed to a price war among competitors, including Lidl, Tesco, and Sainsbury’s. Aldi invested heavily in maintaining competitive pricing, improving infrastructure, and increasing staff wages.

Aldi's market share in the UK was 10.8% last month, according to data from Worldpanel. The company has been steadily growing its presence, overtaking Morrisons to become the fourth-largest supermarket in 2022. The gap between Aldi and third-placed Asda is also narrowing, as Asda holds 11.8% of the market.

Expansion Plans and Industry Implications

Aldi plans to invest £1.6 billion to expand its operations in the UK, with 80 new stores set to open over the next two years. This expansion is expected to bring the total number of UK stores closer to the target of 1,500.

Russ Mould, investment director at AJ Bell, commented that rival supermarket bosses are likely to feel the pressure as Aldi moves toward its growth goals. He noted that this significant expansion will require competitors like Tesco to find innovative ways to retain customer loyalty.

Hurley added that customers are facing severe inflationary pressures, which are compounded by rising bills in other areas. He called for domestic policies that address the persistent inflation issue. Additionally, he mentioned that the delayed Budget on November 26 has created uncertainty among consumers.

Ongoing Concerns About Business Costs

Retailers are still waiting for clarity on changes to business rates, which could significantly impact their operations. Hurley highlighted that the proposed changes might lead to increased costs for large shops, potentially resulting in job losses and store closures. The industry is urging the government to reconsider its approach to business rates and avoid further increases that could harm the retail sector.

In summary, Aldi's leadership is advocating for careful consideration of tax policies and business costs to prevent further strain on consumers and the retail industry. As the company continues to grow, the broader implications for the market and consumer affordability remain a critical concern.