The governor of the Bank of England, Andrew Bailey, has said a group of retailers were “right” to warn of sweeping job cuts as a result of Labour’s punishing £40bn tax raid at the Budget.
A group of Britain’s biggest supermarkets and retail chains, including Tesco, M&S, Boots and B&Q, wrote to the Chancellor Rachel Reeves warning that job losses and price rises were “inevitable” due to Labour’s decision to land business with a £25bn national insurance tax bill and lift the minimum wage.
The letter, signed by over 70 companies and coordinated by the British Retail Consortium, warned the Budget would cause £7bn in extra costs and no retailers would be able to “absorb such significant cost increases over such a short timescale”.
Speaking to MPs at the Treasury Select Committee, governor Bailey said job losses were a realistic prospect.
“I saw the BRC’s (British Retail Consortium’s) letter and I think they’re right to say, I think there is a risk here that the reduction in employment could be more,” Bailey said. “Yes, I think that’s a risk.”
He added that “there will be more pressure on firms’ margins” but they would “probably rebuild those profit margins over time.”
The comments from the Bank of England mark the latest alarm bells over potential layoffs since Rachel Reeves laid out her fiscal plans on 30th October.
Retail and hospitality firms have been among the loudest critics of the decision to hit firms with a hike employers’ contributions on national insurance and to lift the minimum wage.
In an open letter, the trade bodies UK Hospitality and British Institute of Innkeeping have also warned of a potential decline in profit margins and sweeping job cuts as a result of the bill.
It came following a recent survey by British Beer and Pub Association that revealed over half of businesses within the hospitality sector would reduce their employment levels if business rates relief is not extended.
Some 76 per cent of businesses also said their profit margins would decline, with 51 per cent threatening to cancel planned investment strategies.