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The departing head of John Lewis has described changes to employers’ national insurance and a lack of early reform in business rates in last month’s Budget as a “two-handed grab” from UK businesses.
Nish Kankiwala, who is nearing the end of his two-year tenure as chief executive of the department store chain and Waitrose, said the group faces “tens of millions” in additional costs from next year following the Budget.
John Lewis was taken by surprise by some of the measures announced by Chancellor Rachel Reeves, such as the lowered earnings threshold at which businesses start paying NI contributions, although it acknowledged that the government faced difficult decisions, Kankiwala said.
Businesses were disappointed by the changes to NI and the national living wage, and a failure to deliver meaningful reforms that would narrow the gap between rates paid by high street retailers and online giants such as Amazon.
Kankiwala was the latest business leader to bemoan the impact of the Budget, as he said the government should look at “radical change in business rates” because “that looks like it is going up for us, as is our people costs”.
“That seems to be, you know, sort of [a] two-handed grab, and that’s unhelpful.”
The lack of immediate business rates reform came despite Labour’s manifesto promise to “level the playing field between the high street and online giants”.
Instead Reeves announced plans that will add extra costs to businesses, including raising NI for employers by 1.2 percentage points to 15 per cent from April, as part of packages to close a £40bn funding gap.
That prompted the British Retail Consortium to warn of an annual £7bn hit to businesses that would cost jobs and increase prices for consumers. The industry body added that business rates will cost retailers an additional £140mn a year after April next year, although there is relief available for 250,000 premises that are typically occupied by small businesses.
Kankiwala, who will remain an adviser to John Lewis, having joined as a non-executive director in 2021, told the Financial Times: “If they could delay the national insurance [changes], but also if they could fundamentally bring forward a radical reshaping of business rates, I think it will make a massive difference. Not just for small and medium enterprises, but I think for retail generally. It’s very important.”
Business rates are calculated based on the value of the property, hitting John Lewis and its competitors that often have stores located in pricier prime locations, as opposed to out-of-town business parks, where many warehouses operate.
Kankiwala, who became the partnership’s first chief executive in March last year to help turn the business around, said John Lewis and Waitrose would seek to mitigate the impact on prices and consumers.
“The last thing we need is a resurgence of inflation, because we just got that under control, and inflation is not good for anybody . . . We will try and control [pricing] as much as possible,” he said.
He insisted that the John Lewis Partnership would not “see any change in our strategy and investment or in terms of our future growth” despite facing higher costs.
The partnership posted its first annual profit this year, after three consecutive years of losses in which it was hit by intensifying competition on the high street and online, surging inflation and the fallout from shop closures during the pandemic.
In response to criticism from large employers over the Budget changes, the Treasury previously told the FT that the government “had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability to allow businesses to thrive”.
