M&S CEO Warns of Rising Costs, but Vows to Protect Customers from Price Hikes

Marks & Spencer (M&S) CEO Stuart Machin has acknowledged the company is facing significant cost pressures following recent tax changes, but emphasized that the retailer will “do everything we can” to avoid passing these increased costs onto customers.

M&S expects its tax bill to rise by £60 million next year, bringing its total liability to approximately £520 million. This increase is attributed to the Chancellor’s decision to raise employers’ National Insurance (NI) contributions by 1.2 percentage points to 15% from next April, as well as lowering the threshold at which companies begin paying the contribution.

Machin noted that M&S had anticipated some increase in costs following budget announcements but was caught off guard by what he called a “double whammy” of tax changes. In addition to the NI rise, the retailer expects another £60 million increase in labour costs due to higher minimum wage rates, a cost that had already been factored into its planning.

Despite these increases, Machin reiterated that M&S is committed to keeping prices stable, saying, “We’re going to work incredibly hard to mitigate costs elsewhere and avoid raising prices.” He pointed to the company’s “good track record” of finding savings and efficiency improvements as key to managing rising expenses without burdening customers.

The warning from M&S comes amid broader concerns within the retail sector about escalating costs. Analysts suggest that the National Insurance changes alone could add between £550 million and £600 million to the costs of UK grocers. Primark’s parent company has also indicated it may implement measures, such as introducing self-checkouts, to reduce its labour costs in response to similar pressures.

The Budget has sparked discontent across the business community, with a recent survey by the Institute of Directors revealing that two-thirds of business leaders feel negatively about the new policies. Additionally, many of these leaders believe that Chancellor Rachel Reeves’s measures fail to support long-term economic growth.

However, Machin’s cautious outlook coincided with a positive financial performance for M&S. The company reported a 17% increase in profit before tax and adjusting items to £408 million for the six months ending 30 September, surpassing analysts’ expectations of £360 million. The retailer’s shares surged by as much as 7.4% on Wednesday following the announcement.

The strong results highlight the success of Machin’s turnaround strategy for M&S, with both the food and clothing divisions showing growth. Looking ahead to the Christmas season, Machin expressed optimism, citing research indicating that customers are planning to spend more this year than they did in 2023.