Marks & Spencer vows to constrain price rises after Budget hit but warns task ‘not easy’

The chief of Marks & Spencer has pledged to pass on "as little as possible" in costs to customers, but admits that mitigating rising employment taxes will be challenging.

M&S, which has already disclosed a £120 million impact to its wage bill due to recent Budget measures, stated it would strive to maintain prices "as much as we can". However, the retailer acknowledged it was having to explore all areas of the business to counteract the effect.

Tesco, another retail behemoth, also announced on Thursday its intention to minimise price increases, as the sector reels from Budget decisions to raise national insurance contributions (NICs) and minimum wages. M&S shares fell by up to 8% on Thursday, as it also cautioned that the economic outlook "remained uncertain" for the upcoming year, overshadowing figures that showed robust Christmas trading. Shares across the sector followed a similar downward trend.

Regarding escalating costs, Mr Machin stated: "I want to pass on as little as possible of that to our customers. It’s not easy, but I really want us to hold our prices as much as we can.

"What people forget is you’re constantly doing a three-year plan, and when you get these surprises... you have to rework your plan all over again," he added. The NICs hike was one of several tax increases announced in October intended to fund improvements to public services like the NHS.

However, it has faced backlash from some businesses, with numerous firms warning they will need to raise prices to combat the cost pressures. Mr Machin remarked on Thursday: "Our suppliers are also feeling the pinch, and that comes through straight to retail."

He noted that any cost inflation "will be small and it will be behind the market". The company is looking into supply chain savings and ways to enhance efficiency to counteract rising costs, he further explained.

These statements were made as a retail industry group cautioned that food prices are expected to increase by an average of 4.2% in the second half of the year due to retailers facing £7 billion in additional costs from the Budget. The British Retail Consortium has indicated, based on modelling with trade association and industry leaders, that there is "little hope of prices going anywhere but up".

Tesco also shared on Thursday its commitment to "do our very best" to maintain low prices amidst cost surges related to the Budget, acknowledging an anticipated annual impact of around £250 million from the hike in national insurance contributions starting in April. When questioned about potential job cuts following the Budget measures, Mr Machin from M&S admitted: "This is going to be a challenge for us."

Following a surge in M&S’s Christmas sales, primarily driven by its food division which experienced its largest-ever trading day during the period, the retailer reported £4.06 billion in sales for the three months to December 28. This represents a 5.6% increase compared to the same period the previous year.

M&S food sales saw an annual growth of 8.7%, accounting for just under two-thirds of total sales. In contrast, the company witnessed a modest 1% sales growth across its clothing, home and beauty departments.