M&S vows to constrain price rises after Budget hit

They have revealed they will be facing a £120 million hit to its wage bill

The boss of Marks & Spencer has insisted he will pass on “as little as possible” in costs to customers, but that mitigating rising employment taxes will not be easy.

M&S, which has already revealed it will be facing a £120 million hit to its wage bill from recent Budget measures, said it would look to hold prices “as much as we can”, though the retailer said it was having to look across the business to find ways to offset the impact.

Fellow retail giant Tesco also said on Thursday it would look to minimise price hikes as the sector has been left reeling from Budget moves to hike national insurance contributions (NICs) and minimum wages.

Shares in M&S plunged as much as 8% on Thursday as it also warned that the economic picture “remained uncertain” for the coming year, taking the shine off figures showing bumper Christmas trading.

Shares across the sector followed suit with declines.

On rising costs, Mr Machin said: “I want to pass on as little as possible of that to our customers.

“It’s not easy, but I really want us to hold our prices as much as we can.”

“What people forget is you’re constantly doing a three-year plan, and when you get these surprises… you have to rework your plan all over again,” he added.

The NICs increase was one of a string of tax rises announced in October designed to help pay for improving public services like the NHS.

But it has come in for criticism from some businesses, with a number warning that they will need to hike prices to combat the cost pressures.

Mr Machin said on Thursday: “Our suppliers are also feeling the pinch, and that comes through straight to retail.”

He said if there is any cost inflation it “will be small and it will be behind the market”.

The company will try to find supply chain savings and attempt to make the business more efficient to mitigate rising costs, he added.

The comments come as a retail industry group warned food prices will rise by an average of 4.2% in the latter half of the year as retailers battle £7 billion of increased costs from the Budget.

The British Retail Consortium said modelling by the trade association and industry chiefs said there was “little hope of prices going anywhere but up”.

Tesco also said on Thursday that it will “do our very best” to keep prices low in the face of cost increases linked to the Budget, but confirmed it was facing a hit of around £250 million a year from the increase in national insurance contributions when the changes roll out in April.

When M&S’s Mr Machin was asked whether he would cut jobs as a result of the Budget measures, he said: “This is going to be a challenge for us.

“I do not see in M&S big job losses. We’re a growing business. We’ve got lots to do.”

But he added the company would have to be “really diligent” on where it recruits new employees.

“Does it make us look at how we recruit? Of course it does, and that does mean we have to think about where we invest,” he said.

It comes after M&S’s Christmas sales surged, driven largely by its food division, which enjoyed its biggest-ever trading day during the period.

The retailer made £4.06 billion in sales during the three months to December 28, up 5.6% compared to the same period the year before.

M&S food sales grew 8.7% year-on-year, and the department made up just under two-thirds of total sales.

In contrast, the company saw 1% sales growth across its clothing, home and beauty departments.

Published: 09/01/2025 by Radio NewsHub