Supermarket Surtax Sparks Fresh Fears Over Rising Food Prices

A new “supermarket surtax” introduced in the Autumn Budget is prompting questions across the food and retail sectors about how it may influence future grocery prices and the wider supply chain.

The surtax applies to large retail premises with a rateable value above £500,000, affecting an estimated 4,000 supermarket sites across the UK. Revenue generated from the measure will be used to reduce business-rates bills for smaller retailers, including independent grocers and high-street shops, with the stated aim of supporting local retail resilience.

Major retailers have raised concerns that the surtax introduces additional fixed costs at a time when supermarkets are already managing higher wage bills, packaging-compliance costs, energy expenses and broader supply-chain pressures. Several retail groups have stated that these cumulative costs could limit their ability to keep prices down, suggesting the measure may place upward pressure on food inflation through 2025 and into 2026.

Food inflation has eased from previous peaks but remains an issue for many households, particularly those on lower incomes who spend a larger proportion of their budget on essential groceries. Any additional upward trend in retail prices could affect these consumers most directly.

While the government intends the surtax to help support smaller retailers and encourage greater diversity on the high street, its overall impact on the food retail landscape will depend on how supermarkets respond, how much of the cost is absorbed, and whether competitive pressures mitigate or accelerate any price adjustments.

Stakeholders across the supply chain — including retailers, suppliers, growers and consumer groups — are watching the situation closely to assess how the combination of the new surtax and existing cost pressures may shape the UK food market over the coming year.