British consumers face paying more for car repairs and new kitchen kit after retailers Halfords and AO.com warned on Tuesday that the autumn budget had increased their costs.
Halfords, the cycling and motoring retailer, which has more than 12,000 employees, reported that the budget measures would add £23m of direct labour costs, of which £9m was already included in its planning assumptions.
Meanwhile, John Roberts, the chief executive of the online electrical goods specialist AO World, said his direct labour costs would rise by £4m because of changes to national insurance contributions and the minimum wage, and there would be a further £4m from indirect labour costs such as payments to self-employed delivery drivers and agency workers.
“I’m no economist, I’m a washer flogger from Bolton, but if you dramatically increase all the costs then prices will go up, as night follows day. They have to,” Roberts said.
He said he was concerned as “inflation hurts the people that can afford it the least the most.”
Graham Stapleton, the chief executive of Halfords, said: “The cost implications from the recent UK budget are particularly acute for a specialist retailer that provides expert advice and assistance to customers, face to face.”
He urged the government to consider other ways of supporting businesses, including the acceleration of apprenticeship levy reform, which would help the company to upskill existing staff and offset some of the cost rises.
Halfords said it would find it easier to pass on increased costs to customers in its “more needs-based Autocentres servicing business, where pricing power is greater”, although it was also considering other ways to keep costs down.
The effect of the budget on consumer behaviour was unclear, the company said.
The chancellor, Rachel Reeves, defended her £40bn of tax rises at the CBI business group’s annual conference on Monday, saying there were “no alternatives”. Businesses bore the brunt of the measures, with increases to employer national insurance contributions and a rise in the national minimum wage from April.
Halfords reported revenues of £864.8m for the six months to 27 September, down 0.1% at outlets open at least a year. It made a profit before tax of £17.8m, down 23% from a year earlier.
Sentiment among retailers about their business situation over the next three months has fallen at the fastest pace for two years this month, according to the CBI’s latest quarterly Distributive Trades Survey.
The poll found that retail sales volumes have fallen “moderately” in the year to November, with retailers judging sales to be “poor” for the time of year.
“Retailers continue to report disappointing sales, though trading conditions have shown some improvement since the middle of the year. Yet the last time retailers felt this gloomy was back in November 2022, at the peak of the inflation shock. This makes the sharp decline in sentiment this month all the more telling,” said Ben Jones, the lead economist at the CBI.
“The stark rise in employers’ national Insurance next year will hit retailers hard. And the planned increase in business rates for higher-value properties will add significant operational costs for distribution centres,” Jones added.
