The Entertainer Halts Expansion Plans Due to NI Hike
The Entertainer, a leading UK toy retailer, has scrapped plans to open two new stores following the government's decision to raise employer National Insurance (NI) contributions. This move underscores growing concerns among businesses about the impact of the Budget's changes, which will increase the NI rate for employers from 13.8% to 15% from April 2022.
The Entertainer's CEO, Andrew Murphy, explained that the increased costs have also led to a hiring freeze at the company's head office. He highlighted that the company had completed viability assessments for two new locations, but the NI rise shifted the financial outlook, leading to the store closures.
Murphy acknowledged the government's goals but expressed concerns about the chosen approach. He stated, "There's no argument with the government's ultimate goals… simply the balance with which they pursued them."
Other major companies, including Sainsbury's and Marks & Spencer, have also expressed concerns about the potential impact of the NI increase on prices. Sainsbury's CEO, Simon Roberts, estimated that the supermarket chain faces £140 million in additional costs, warning that this "is going to feed through into higher inflation."
The government has defended the tax hike as a means to "restore desperately needed economic stability." Chancellor Rachel Reeves stated, "We've got to raise the money to put our public finances on a firm footing."
Some businesses are considering expanding operations outside the UK in response to rising employer costs. Arnab Basu, CEO of Kromek, noted that planned cuts to US corporation tax under President-elect Donald Trump, coupled with lower energy costs, make the US an increasingly attractive environment for investment.
Similarly, Associated British Foods, the parent company of Primark, has suggested that tax increases may prompt it to prioritize growth beyond the UK. CEO George Weston commented, "We're an international business as well, we have choices about where we will invest."
The Treasury defended the NI changes as essential for economic recovery. "This government is committed to delivering economic growth by boosting investment and rebuilding Britain," a spokesperson said.
The Entertainer's decision highlights a broader trend of UK businesses reassessing domestic investments as they navigate the evolving tax landscape and rising operational costs.