The fallout from the new government’s first Budget continued with retailer Halfords revealing that it expects to take a £23m hit due to the tax increases.
In its latest interim results, the retailer said that the combined effect of policies announced in the Budget would put up costs by around £23m, of which around £9m was already fully mitigated.
In the Budget, the government increased employers’ national insurance to 15 per cent and pushed up the minimum wage by 6.7 per cent. Halfords is only the latest firm to warn of the impact this will have on business.
“It will inevitably be challenging to fully mitigate a single-year cost increase of this magnitude, particularly in the retail business where many of our product categories are discretionary and/or big ticket and substantial cost has already been removed in recent years,” boss Graham Stapleton said.
He called on the government to mitigate the impact by accelerating the reform of the apprenticeship levey, which he said would help to “upskill existing colleagues and offset some of the new headwinds”.
The firm said that the impact of Budget on consumers was more “unclear”, suggesting it would be more able to mitigate headwinds in the needs-based autocentres servicing business.
“Additional tactical and structural options to support mitigation are under review,” it added.
The comments came as the firm reported that pretax profit had fallen by 23 per cent in the first half of the year to £17.8m, ahead of market expectations. Underlying profit was roughly flat at £21m.
Like-for-like sales were down 0.1 per cent in the first half, with a 0.7 per cent fall in retail sales offsetting a 0.8 per cent rise in autocentres.
Despite Budget headwinds, the firm said it was comfortable with consensus expectations for the 2025 financial year. Shares rose over five per cent in early trade.
“While the short-term outlook remains challenging, we will continue to build on our unique omnichannel platform and focus on what we can control to deliver on our strategy this year and beyond,” Stapleton said.