Tesco’s chief executive has criticized proposed tax measures targeting large warehouses, warning that the retail sector is already burdened by disproportionately high business rates. Ken Murphy urged the government to exempt retailers from plans to impose higher business rates on warehouses with a rateable value exceeding £500,000, calling the current system “fundamentally unfair.”

Murphy highlighted that retailers currently pay four times more in business rates than their share relative to the size of the sector within the overall economy. His comments come ahead of the upcoming Budget, where the government is expected to expand a surcharge on larger commercial properties, a measure originally introduced in last year’s Budget by then-Chancellor Rachel Reeves. The added revenue is intended to support a 20% rate cut for smaller businesses deemed to bring social benefits, such as pubs and live music venues.

However, retail industry leaders have expressed concern that increased costs for warehouses, predominantly used by physical retailers rather than online-only companies, could be passed on to consumers through higher prices. While Murphy did not confirm whether Tesco would raise prices, other industry voices have been more direct. James Bielby, chief executive of Food and Drink Wholesale UK, recently stated that any increase in warehouse business rates would almost certainly be reflected in consumer prices.

Analysis by consultancy Ryan found that some of the country’s largest warehouse business rate bills are held by major retailers including Tesco, Lidl, John Lewis, Sainsbury’s, and Marks & Spencer.

Tesco’s comments coincided with the company’s upward revision of its profit forecast. The supermarket group now expects annual profits between £3.15 billion and £3.3 billion for the fiscal year ending February 2027, improving on previous guidance of £3 billion to £3.3 billion. The company also reported a 1.5% increase in like-for-like UK sales during the first half of its fiscal year, with operating profits rising 6.6% to £1.7 billion.

Murphy noted evolving consumer trends, including a growing preference for healthier eating and drinking habits spurred in part by the COVID-19 pandemic. He highlighted increased sales of “low and no” alcohol beverages and shifts towards meals higher in fibre and protein, as well as smaller portion sizes.

In line with its digital strategy, Tesco is expanding the rollout of an artificial intelligence (AI)-powered meal planning assistant. Initially trialed with store employees in April, the AI tool is now being made available to customers through the Tesco app. The assistant uses Clubcard data to provide personalized recipe suggestions based on dietary preferences and items customers already have at home, aiming to offer a more tailored and convenient shopping experience.

Murphy described this innovation as part of Tesco’s broader efforts to integrate AI-enabled personalization and improved value offers, noting that the technology is designed to help customers manage their daily routines more efficiently.