Finance
M&S and Wetherspoons face multi-million pound hit from ‘double whammy’ budget
Published by Jessica Weisman-Pitts
Posted on November 6, 2024
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By James Davey and Yamini Kalia
LONDON (Reuters) – Marks & Spencer and JD Wetherspoon, two of Britain’s biggest high street employers, said higher taxes and a jump in the minimum wage would cost them a combined 180 million pounds ($232 million) annually.
Britain said last month it would raise employers’ National Insurance (NI) social security contributions by 1.2 percentage points to 15% from April, and also lower the threshold when firms start paying to 5,000 pounds from 9,100 pounds.
The reduced starting level will hit retail and hospitality hard because they employ large numbers of part-time workers.
The increase is expected to raise about 25 billion pounds a year by the end of the decade, by far the largest tax measure announced by new finance minister Rachel Reeves in her budget.
M&S, which employs 64,000 workers, said the NI increase would cost it around 60 million pounds in its next financial year, which starts in April.
Chief Executive Stuart Machin said that while the increase had been well flagged before the budget, “we didn’t quite see the double whammy coming up”.
“We didn’t quite realise the threshold as well as the increase would impact us,” he said after the company reported strong first-half results on Wednesday. “If you take that one thing in totality for us, that’s around 60 million pounds of headwind as we think about next year.”
The new Labour government also announced a 6.7% rise in the minimum wage, increasing costs for the same sectors.
The hike, which M&S said was a “good cost”, will add another 60 million pounds to its wage bill.
The Office for Budget Responsibility, whose forecasts underpin the government’s tax and spending plans, said last week the NI increase would add to inflation as firms pass on the cost to consumers and would weigh on the size of Britain’s workforce.
M&S said it would try to absorb the extra costs without passing them onto customers.
JD Wetherspoon, a major British pub operator that employs more than 40,000, said the budget increases would cause price rises across the hospitality sector.
It said its own annual costs would increase by about 60 million pounds in 2025, with its NI contributions rising by an estimated two thirds.
Chairman Tim Martin told Reuters the company did not plan immediate price rises in response.
Wetherspoon will, as always, make every attempt to stay as competitive as possible,” the group said in a trading update.
($1 = 0.7745 pounds)
(Reporting by James Davey, Sarah Young and Yamini Kalia; Writing by Paul Sandle; Editing by Mark Potter)