A MAJOR retailer has warned that it may need to push up prices at its repair garages after Labour’s tax raid in the Budget last month.
Halfords said that the cost implications of next April’s increase in National Insurance contributions (NICs) and the minimum wage increase were “particularly acute”.
In the Budget last month the government pushed up the amount that employers will pay in National Insurance from 13.8% to 15%.
The changes come into effect next April and will increase the costs for employers, which they may be forced to pass on to customers.
Halfords has more than 12,000 employees so the Budget changes will send its wage bill soaring by around £23million.
It said only around £9million of the extra costs were already included in its plans for 2025-26 and mitigated.
As a result it may need to “pass through” the higher cost of wages to customers across its garages.
The group said it would be difficult to reduce the impact of a one year cost increase of this size.
This will be particularly evident in its retailbusiness, where customers opt-in to many of its products and categories.
Many items are also be big-ticket purchases, which the retailer said customers were holding back from making due to financial uncertainty.
The group added: “We anticipate being able to pass through wage inflation more easily in the Autocentres business, where a greater proportion of revenue relates to services.”
But Graham Stapleton, chief executive of Halfords, said that the retailer will “work hard to mitigate these costs”.
He added: “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.”
The news comes as half-year results out today showed the company’s pre-tax profits fell 23.3% to £17.8million in the six months to September 27.
Revenues also dropped by 0.1%, with more difficult retail trading offsetting growth in its Autocentres arm.
Meanwhile, profits slumped by 1.4% on an underlying basis, to £21million.
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Halfords is calling on the Government to help soften the financial blow by overhauling the Apprenticeship Levy.
This levy is charged at 0.5% and is paid by large employers with a pay bill of more than £3million.
Stapleton said: “We urge the Government to consider alternative ways of supporting businesses like ours, including the acceleration of Apprenticeship Levy reform, which would help us to upskill existing colleagues and offset some of the new headwinds.”
Other retailers warning of rising costs
Halfords’ announcement follows price increases from many other retailers and hospitality groups.
Yesterday Greggs’ boss Roisin Currie warned that prices could rise after the Budget tax changes.
She said the measures rolled out by Chancellor Rachel Reeves would put pressure on prices, but it was likely to be only “pennies”.
Meanwhile, last week Lidl chief Ryan McDonnell told The Sun that the tax raid had left the major supermarket with “tens of millions of pounds” in additional costs.
Bosses of major retailers including Asda, Primark, Sainsbury’s and M&S have also issued similar price warnings.
Asda chairman Stuart Rose said the increase would cost the supermarket £100million, which would inevitably lead to price increases.
He explained: “You cannot absorb £100milion of cost. We don’t have a magic money tree in Leeds.”
His warning followed comments by Sainsbury’s chief executive Simon Roberts, who said the supermarket “didn’t have the capacity” to absorb this level of unexpected cost inflation.
He said the National Insurance hike would cost the business £140million.
Sainsbury’s is already looking to close Argos sites to save money.
Popular pub chain Wetherspoons has also warned that it may be forced to put up its prices.
Its boss Tim Martin said it would aim to stay competitive on costs for customers.
The chain’s tax bill is expected to rise by around two-thirds next year due to the National Insurance hike.
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