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Associated British Foods (ABF), owner of the popular retail chain Primark, announced it is considering redirecting investments internationally due to concerns over the UK’s recent Budget, which places a higher tax burden on businesses, particularly those in retail. ABF’s Chief Executive, George Weston, stated that as a global business, ABF has "choices about where we will invest" and is weighing its options as the UK market adjusts to the new tax changes.
ABF’s statement follows its recent report showing a 43% increase in pre-tax profits, amounting to £1.9 billion over the year ending 14 September. However, the company noted that additional tax measures introduced by Chancellor Rachel Reeves, including an increase in employers' national insurance contributions, could significantly impact operating costs, particularly on the High Street. Weston estimated the NI changes would push ABF’s wage bill up by "tens of millions."
Budget Impact and Retail Sector Reactions
The Labour-led Budget, the first in 14 years, has drawn mixed reactions, with Ms. Reeves acknowledging the criticisms but affirming the tax measures would secure the UK's financial stability. Business leaders, however, expressed concerns about rising employer costs, fearing it could slow growth in an already challenging economic environment.
Despite the anticipated cost hikes, Weston assured that Primark has "no intention" of increasing prices in the near term, hoping to maintain affordability for consumers amid inflationary pressures.
Retail Trends: Primark's Growth and Market Conditions
Primark saw a modest 0.7% increase in sales across the UK and Ireland, with womenswear categories like sportswear, jumpers, and pyjamas performing particularly well. The brand’s overall sales grew by 6%, driven by solid demand for autumn and winter apparel despite challenges posed by the wetter summer, which dampened sales for seasonal items like sandals and beachwear.
Meanwhile, the British Retail Consortium (BRC) reported a "disappointing" October for retail, with overall sales up only 0.6% year-on-year, a decrease from 2.6% in October 2023. The BRC’s Helen Dickinson noted that factors like delayed spending due to half-term timing and consumer caution over rising energy bills could have influenced the trend. Mild weather also reduced early-season purchases for winter goods like coats and jackets, with shoppers potentially awaiting "Black Friday" deals.
Asos and the Shift in UK Retail
Asos, another major player in UK fashion retail, reported significant losses of £393 million up to 1 September. The company has been reducing stock and launching clearance sales to tackle these challenges. Analysts suggest the brand is struggling to compete with emerging rivals like Shein and second-hand marketplaces such as Vinted. However, Asos CEO Jose Antonio Ramos Calamonte noted "green shoots" in the company’s recent performance, hinting at potential improvements in its newly launched ranges.
With the Budget's impact still unfolding, many UK retailers, including Primark, are closely assessing strategies to maintain resilience in a landscape increasingly influenced by tax policy and evolving consumer spending habits.
