The UK’s retail sector has urged the government to act on increasing business costs linked to the Iran conflict, saying retailers may find it difficult to limit price increases for consumers without additional support.
The British Retail Consortium (BRC) said the conflict was pushing up costs across supply chains, including energy, production, shipping and distribution.
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It said these pressures were being added to existing increases tied to higher employer taxes, wage increases and packaging levies.
According to the BRC, retailers have absorbed £6.5bn ($8.86bn) in extra employment-related costs over the past two years.
It said these costs arose from higher employer National Insurance contributions and rises to the National Living Wage.
The trade body said the Extended Producer Responsibility packaging levy would add a further £1.6bn in costs for the sector.
The BRC also cited additional regulatory pressures.
These included guaranteed hours measures under the Employment Rights Act and proposed food reformulation requirements under the Nutrient Profiling Model.
It said rising gas and electricity prices were lifting costs across supply chains, with effects on fertiliser production, manufacturing and logistics.
The organisation said consumers were likely to feel the impact “over the coming months”.
Food retailers met UK Chancellor of the Exchequer Rachel Reeves in early April and put forward three proposals intended to ease cost pressures.
The first proposal asked for the removal of non-commodity energy charges, including policy levies, network costs and system fees.
The BRC said these charges now account for between 57% and 65% of a typical business electricity bill, compared with 20% ten years ago.
It added that the proportion could reach 75% by 2030.
The organisation said removing legacy Renewables Obligation and Feed-in Tariff costs would deliver immediate relief for businesses.
Its second request was for the government to delay implementation of the Nutrient Profiling Model.
The BRC said that without a delay, manufacturers would have to reformulate thousands of food products while also dealing with supply disruption and higher energy costs.
The third proposal called for a review of what the BRC described as a “triple packaging levy”.
It said this covered the Extended Producer Responsibility levy, Plastic Packaging Tax and Packaging Recovery Notes, which together cost retailers more than £2bn a year.
The BRC also said Germany had moved renewable energy levies from business energy bills to general taxation.
It added that EU leaders were considering comparable steps following the Strait of Hormuz crisis.
BRC CEO Helen Dickinson said: “The Middle East conflict is driving up costs across the supply chain, and families are right to be concerned. But not every pressure bearing down on retailers comes from the Gulf.
“Higher national insurance, packaging levies, new regulations, and business energy charges are all domestic policy decisions, made in Westminster, and they can be addressed there. Such action by the government would help retailers to keep prices affordable for households.”
