By Stuart Machin, M&S Chief Executive

At M&S we are transforming, and we have our gaze firmly set on the future. We’re committed to long term growth, investing in a new modern store estate, supply chain transformation, innovative digital technology, sourcing capability and world class product development. But we can’t take our eyes off the task in hand today – we have so much to do and much progress to make right now – trading well today is fuelling our investment in tomorrow. It’s a balancing act, but one every business leader is familiar with. 

The Chancellor has her own balancing act to do, and it is an extremely precarious one. Many of the announcements in Rachel Reeves’ speech last week were commendable - a focus on long-term planning, good ideas to free up investment in infrastructure and a more positive tone. But the speech failed to address the significant impact of the Budget on the here and now, and at its heart remains a contradiction: Long-term growth ambitions are laudable, but they are at risk of remaining only that unless action is taken to encourage growth today. 

If the Government wants to invest in the future, then lightening the burden that the Budget loaded onto the retail sector should be at the top of its immediate action list.

Retail anchors the UK economy, it is fast paced and dynamic, employing three million people directly and two million people in its supply chains. It isn’t just the country’s biggest private sector employer, it’s the country’s engine. Running 24/7, it powers social mobility, providing good quality jobs from Aberdeen to Ashford. It helps people get on in life with worthwhile training and development; I should know – I started my career in retail as a 16 year-old. It’s at the centre of our high streets with scale retailers driving footfall and supporting jobs for smaller players. It’s the most competitive, innovative retail market in the world. For some reason this huge economic and employability engine is seemingly ignored by governments, and I wonder if some of that comes from a place of snobbery. 

The blunt truth is, left how it is, the Budget means UK retail will get smaller. The sector already pays an effective tax rate of 55% and the Chancellor’s Budget will add £7bn of extra employment costs and increased packaging levy to a sector working on margins of 3-5%. While businesses like M&S will fight tooth and nail to hold down prices for customers, the BRC and IGD are already projecting food inflation of over 4%. At M&S we are growing, but others are not and there is no doubt there will be fewer jobs, fewer shops, and slower wage growth across the sector as a whole. The impact is being felt in the supply chain too. UK food manufacturing and farming will contract, domestic product will go up in price and more food will be imported with potentially less stringent quality and environmental standards. This is happening already with declining herds and beef and lamb prices up over 60% since 2020. 

Pre-budget, British retailers were already navigating some difficult headwinds, not least the impact of leaving the EU. Five years on and the Brexit bureaucracy continues, processes designed a decade ago are simply archaic in today’s digital and fast paced retail environment: mountains of detailed paperwork, veterinary sign offs and hoops to jump through add significant complexity and cost. It is painful for us and I know that it is crippling for smaller businesses. 

This depressing prognosis is compounded by some ill-thought through decision making. The Employment Rights Bill means we would have to say no to a colleague usually working weekend hours who requests more shifts, and the change to the National Insurance Contributions threshold will hit part-time workers hardest. The nonsensical Deposit Returns Scheme is slated to go ahead in 2027 despite it collapsing in Scotland and Wales pulling out. The Extended Producer Responsibility, born as an environmental levy to fund recycling, will give retailers a tax bill 20 times the current amount with £2bn going straight to the Treasury as general taxation and no improvement to recycling. Retail is being raided like a piggy bank and it’s unacceptable. 

A week on from the Chancellor’s speech, the Bank of England halved its growth forecast for the year and economists are warning that increased government borrowing costs and lower growth forecasts will squeeze the Treasury’s sliver of fiscal headroom even further. As her leeway evaporates, the Chancellor’s iron clad rules will be put under further pressure as she faces the disastrous prospect of breaking her manifesto promise not to raise personal taxes. Reneging on that commitment would be bad for everyone - business, consumers and the economy – for the Labour government, that isn’t just an economic problem, it’s a political one. 

Measures announced in November’s Budget are contributing to the anaemia driving lower growth forecasts.  But there are some immediate steps that the government can take now to reverse that malaise and drive growth today, and we have been clear on these in our communication with the Chancellor and her team.
My ask of the Chancellor is to get the balance right, show her strength of leadership and pivot in four key moves:

1. Phase the timing of the NICs threshold decrease over two years to help employers manage the impact. This was tabled by Lord Wolfson; it is an idea that I wholeheartedly support and have also raised with the Chancellor.  It will give retailers some breathing space to manage the increase in the National Living Wage – which I see as a good cost. 
2. Delay the increase in EPR fees and, more broadly, pause and review all Defra circularity schemes. They have been poorly planned and evidence to date shows that they are highly costly and nigh on impossible to operate. 
3. Rethink the approach to business rates. We need a proper review of business taxation facing retailers, not a tweak which redistributes funds within the sector. The £500k threshold hits high street stores, which I know the Government did not foresee, so take those stores out of it. 
4. Ensure the Secretary of State for Environment, Food & Rural Affairs works with the sector, not against it. Co-create a Food Strategy focused on growing British food production, push on with a Veterinary Agreement to help smooth the impact of Brexit, and think again on Inheritance Tax. These would be the right decisions for the environment and welfare too.

At M&S we talk about ‘the unvarnished truth’ – getting the thorny issues on the table and admitting when we need to change a decision. We have a culture where we say it like it is and talk about our mistakes. Business leaders constantly react to a changing world and new pressures, balancing the short and long term, being open when we get things wrong and course correcting. Looking after growth today, to enable investment in tomorrow. The Government must do the same and it will be respected for its strength of leadership and honesty if it does. The Chancellor must act now.