Labour’s proposal to increase taxes on warehouses has drawn warnings from retailers and industry leaders that it could exacerbate the cost of living crisis in the UK. The plan, advocated by Prime Minister Andy Burnham and set to be a feature of the upcoming Budget, aims to raise revenue by taxing warehouse properties more heavily. The funds are intended to support tax cuts for businesses seen as contributing social benefits, such as pubs, bars, and other high street shops.

However, supermarket executives and retail organizations caution that such a tax could translate into higher prices for consumers. They note that many warehouses are utilized by established high street retailers rather than exclusively by online companies, meaning the tax burden would ultimately fall on consumers through increased costs at the checkout.

James Bielby, chief executive of Food and Drink Wholesale UK, emphasized that any additional tax on warehouses would likely be passed along to shoppers. A senior supermarket executive echoed this concern, warning that imposing a warehouse tax without simultaneously easing the business rates burden on stores of all sizes would hamper job creation and add inflationary pressure.

The British Retail Consortium (BRC) highlighted that the retail sector already contributes a disproportionately large share of business rates revenue. Helen Dickinson, the BRC’s chief executive, underscored that retail accounts for just 5% of the UK economy yet pays about 20% of the total business rates bill. She emphasized that increasing costs in this sector amid ongoing inflationary pressures, including those linked to the Middle East conflict, could further strain family budgets.

Analysis by property firm Savills indicates that in 2024, high street retailers occupied approximately 97 million square feet of warehouse space, compared to 69 million square feet used by online retailers, challenging the notion that warehouse tax hikes would primarily target e-commerce giants. Retailers have already faced rising business rates bills following reforms introduced by former Chancellor Rachel Reeves, which the Treasury said were aimed at taxing major online firms.

Chancellor John Healey is reportedly finalizing plans to raise the threshold for business rates relief for small shops for the first time in a decade, while needing to identify around £10 billion in additional revenue to meet fiscal targets. Sources suggest that higher property taxes on warehouses may be a key element in balancing the books.

A Treasury spokesperson declined to provide details, stating that tax decisions will be addressed by the Chancellor at forthcoming fiscal announcements. The debate highlights the ongoing tension between efforts to support local high street businesses and concerns over potential cost increases affecting consumers nationwide.