Sainsbury’s ‘doing everything’ to win supermarket price war amid Budget tax raid fears

Sainsbury’s is ‘doing everything’ to win a supermarket price war, the group’s chief executive has said, as he cautioned the Chancellor against further tax rises. 

Simon Roberts said there is ‘uncertainty’ among consumers ahead of the 26 November Budget, which is expected to see Rachel Reeves increase taxes on customers and businesses.

In a speech earlier this week, the Chancellor did not rule out manifesto pledge-busting hikes and intensified fears that she is primed to increase income tax, national insurance, corporation tax or VAT.

When Roberts was asked if he was worried about the impact of potential tax rises on households, he said: ‘We have got to make sure, as a country and as an industry and here at Sainsbury’s, that we’re doing everything we can to make sure that that pressure on household finances is contained.’

It comes as supermarkets have been slashing prices in a bid to attract new customers, despite inflationary pressure in the food chain.

Although households are ‘concerned about the cost of living’, Roberts said Sainsbury’s offer has ‘never been stronger’ after food sales rose 5.7 per cent in the three months to 13 September.

Sainsbury’s is among the major retailers to have told Labour that tax increases will pile pressure onto Brits’ weekly shops

The group has been attracting customers with an expanded range of Taste the Difference ‘dine in’ meals as customers opt to stay in rather than going out to eat.

Roberts said that costs in the system, including a £140million increase to Sainsbury’s annual National Insurance payments, have ‘gone up very substantially’ following last year’s Budget.

‘What we don’t want to see is any further cost impacts in the industry,’ he said

Retailers were last year hit with cost increases worth £7billion in last year’s Budget.

‘[Customers are] concerned about the uncertainties that are out there, and that’s why, when they do their weekly grocery shop, we’ve got to do, and have been doing everything we can to make sure that our value is as sharp and as strong as it can be for customers.

Retailers have also urged Labour rule out a further raid on the sector, or otherwise risk further increases in prices for customers.

Sainsbury’s is among those to have told the Government it will be forced to increase prices if it follows through with plans to increase business rates for larger shops.

Under proposed reforms, around 4,000 shops, including ‘big box’ supermarkets’, will have to pay higher taxes in order to reduce the bill for smaller retailers.

The British Retail Consortium has said no shop should pay more and that instead, cheaper bills for smaller stores should be paid for by offices and warehouses.

Roberts said senior Government officials had shown ‘an appetite to listen’ to businesses including his on the topic, hinting at hopes that Reeves could offer the big retailers a reprieve.

Sainsbury’s and its rival Tesco have been vying for market share with discounters Aldi and Lidl through cutting prices.

And Sainsbury’s has also benefited as customers flock away from the third largest grocer Asda.

For the six months to 13 September, it said sales rose 4.8 per cent to £15.6billion as retail underlying operating profit increased 0.2 per cent to £504million.

This helped Sainsbury’s to upgrade its annual profit expectations for retail underlying operating profit to ‘more than £1 billion’.

It had previously forecast that profits would remain flat.

Dan Coatsworth, head of markets at AJ Bell, said: ‘Its latest results give the impression of a business in a sweet spot. Profit guidance has been upgraded, it has announced a special dividend and a boost to its share buyback scheme, and the dividend has gone up by more than the rate of inflation.

‘Sainsbury’s shares have enjoyed a good run since April, but the lacklustre market reaction to its half-year results would suggest investors might be starting to wonder if the supermarket has reached its peak.’

DIY INVESTING PLATFORMS

AJ Bell

AJ Bell

Easy investing and ready-made portfolios

Hargreaves Lansdown

Hargreaves Lansdown

Free fund dealing and investment ideas

interactive investor

interactive investor

Flat-fee investing from £4.99 per month

Freetrade

Freetrade

Investing Isa now free on basic plan

Trading 212

Trading 212

Free share dealing and no account fee

Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.

Compare the best investing account for you