UK Budget 2025: PwC comments on implications for retail and consumer businesses

Jacqueline Windsor, Head of Retail at PwC UK comments on the impact of the Chancellor’s Budget on retail and consumer businesses: 

“Today’s Budget brought some respite for the 85% of consumers who have told us that they are concerned about the cost of living, with one-year freezes on fuel duty and rail fares and a short-term cut to energy bills being the biggest impacts. While these will be offset by longer-term indirect tax rises such as the freeze on income tax thresholds, in the short-term retail and hospitality businesses will hoping these measures bring spending momentum to what has been a slow start to the critical Golden Quarter in the run-up to Christmas.

“Longer term, the Budget does not allay many consumer-facing businesses’ concerns about the cost of doing business. While there has been no repeat of the employee NICs rises from last year, the 4.1% increase in National Living Wage and even higher 8.5% increase in minimum wage for 18-20 year olds particularly affect the workforces of the retail and hospitality sectors. While there will be reductions in business rates for smaller properties, the permanently higher multiplier for properties over £500,000 will affect larger stores, notably supermarkets and high street anchor stores, as well as warehouses. This will inevitably put pressure on, for example, grocery prices that are already bucking the wider trend of lower inflation.

“Other measures to support the high street were more limited, most notably with some loosening of licensing rules and planning reforms designed to help retail and hospitality businesses expand, and a commitment to end customs duty relief on low value imports, which have increased to the UK since the US and EU imposed similar tariffs.

“However, the benefit of these is likely to be offset for many businesses by a host of smaller tax increases, such as the usual RPI uprating on alcohol and tobacco, as well as the extension of the soft drinks levy to lower sugar and milk-based drinks.

“In addition, many of the asks from retail and hospitality industry bodies, such as for no business to pay higher business rates, lower VAT on hospitality sales, and a restoration of tourist VAT refunds, went unheeded by the Chancellor. 

“Finally, while targeted at those with the broadest shoulders, measures affecting the better off, such as NICs charges on salary sacrifice and higher tax on savings, dividend and property income, will squeeze the wallets of some of the bigger and more resilient consumer spending groups in the longer term.

“So, while we expect that the Budget will do nothing to dent appetite for Black Friday sales over the coming week - expected to increase to £6.4 billion this year - or anticipated record Christmas spending, the outlook for 2026 and beyond may be more muted.”

Our full Budget reaction