Warning over new £2-billion tax in the UK that will hit everything from beer to toasters
UK retailers reported a strong April on the back of good weather and Easter sales, but they need to be wary of upcoming costs, including a new tax, which is set to hit later this year, says the British Retail Consortium.
The retail group’s data shows that total UK retail sales increased by 7% year on year in April, against a decline of 4% in April 2024. This was above the 3-month average growth of 2.9% and the 12-month average growth of 1.4%.
At the same time, food sales increased by 8.2% year on year in April, against a decline of 1.6% in April 2024. This was above the 3-month average growth of 3.9% and above the 12-month average growth of 2.9%.
Non-food sales increased by 6.1% year on year in April, against a decline of 6% in April 2024. This was above the 3-month average growth of 2.1% and the 12-month average growth of 0.1%.
“Retail sales have been showing growth for five months now,” said Linda Ellett, UK Head of Consumer, Retail and Leisure at KPMG.
“The pace of that growth picked up in April due to Easter and the drier weather boosting clothing and garden related sales, while the uptick in house buying ahead of the Stamp Duty changes likely filtered through to furniture and DIY related sales, as well as other homeware.”
“Consumers tell us they are still taking steps to manage their household budgets, so retailers will need to focus on how they can continue to unlock spending over the coming months to keep the growth going, including capitalising on purchases related to strong summer holiday demand.”
Good weather is responsible for strong sales, but there are clouds on the horizon
The sunniest April on record was part of the reason for a boost to retail sales, said Helen Dickinson, CEO of the British Retail Consortium.
“The sunniest April on record brought with it a boost to retail sales. While the stronger performance was partially a result of Easter falling in April this year, the sunshine prompted strong consumer spending across the board.”
“Food sales performed well as people brought together their family and friends for Easter celebrations, while sales of DIY, homeware and gardening goods shone bright as people made the most of the weather,” she said.
Clothing sales, where growth has been sluggish in recent months, also improved as consumers refreshed their wardrobes for the new season.
“But clouds loom on the horizon as new costs begin to bite. Even a strong April performance will do little to make up for the extra £7 billion facing the industry this year. Both Employer National Insurance Contributions and the National Living Wage rose last month, and retailers face another £2 billion bill when a new packaging tax comes in later this year,” she said.
“If the Government wants to secure the future of our high streets, then it must ensure that no shop pays more as a result of the upcoming business rates reforms, or it will be our local communities that pay the price.”
New packaging tax
The Extended Producer Responsibility (EPR) for packaging, which will come into effect later this year, effectively shifts the cost of recycling from councils to businesses. Experts told the Guardian that the tax will push up the price of several key products, including drinks, beer, kitchenware, and even small appliances.
In an open letter published at the end of 2024, Emma McClarkin, CEO of the British Beer and Pub Association, warned that the tax would come at a heavy cost.
“Our sector has ambitious net-zero targets and is committed to a circular economy and working together to achieve this in a sustainable manner,” she said.
“However, these suggested fees pose a serious risk of business failure and could lead to extra cost for the customer, strangle investment and growth, which means fewer jobs, and lead some to make heartbreaking decisions about whether they can keep making their beer.”
“It is critical that the Government takes a step back to consider the devastating impact this could have on our industry, which plays a vital role in the UK’s economy and employment. We urge them to review these fees and make them fairer and more sustainable, so we can continue to do business,” McClarkin said.
In a separate letter sent to the government, trade associations advised that for 330ml glass bottles, the figures published will add between 3p and 7p on each of the 3.2 billion bottles of beer sold in the UK each year, a cost of up to £212 million and with a midpoint estimate of £167 million. For heavier 500ml bottles, in which most premium bottled ale is sold, the costs could be up to 9p per bottle.
