Consumer electronics retailer Currys says price increases are ‘inevitable’ due to UK budget

The situation: The UK’s latest budget and other recent government policies will drive up UK electronics retailer Currys’ costs by £32 million ($40.6 million)—more than double its initial projections, per the BBC.

• The budget increases employers’ National Insurance contributions, costing the retailer about £12 million ($15.22 million) next year, as well as the National Living Wage by 6.7%, costing Currys another £9 million ($11.41 million).
• The retailer claims those same wage and tax increases will drive up its supply chain costs by £9 million ($11.41 million).
• Rising business rates will add another £2 million ($2.54 million) to Currys’ burden.

The fallout: Currys will hike prices to protect its bottom line, said CEO Alex Baldock during the company’s earnings call. “The scale and the speed of these new headwinds makes some price rises… inevitable,” he said.

The budget will also put a damper on Currys’ investment and hiring plans.

Zooming out: Currys was one of several UK retailers that sent a letter last month warning Chancellor Rachel Reeves that the budget would lead to High Street job cuts, price increases, and store closures.

• Retailers like Sainsbury’s and Marks & Spencer have already suggested they’ll raise prices, while pub chain Wetherspoons said “all hospitality businesses” will hike prices.
• George Weston, CEO of Primark parent Associated British Foods (ABF), expects the budget will raise its costs by “tens of millions” of pounds. While Primark doesn’t plan to hike prices this year, it may shift more of its investments overseas due to the “weight of the tax rises” falling on business, Weston said.

Our take: The UK budget forces retailers to face a Catch-22: throttle demand by hiking prices or eat into their bottom line by absorbing the additional costs.

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