Getty ImagesThe Entertainer toy shop chain says it has been forced to drop plans to open two new stores after the government said it would raise National Insurance (NI) Contributions for employers.
Chief executive Andrew Murphy told the BBC the higher taxes, announced in last week’s Budget, meant it could no longer go ahead with the shops and it had also frozen hiring at its head office.
A number of companies, including Sainsbury’s and Marks & Spencer, have hinted that Labour’s changes to NI could result in higher prices for customers.
The Treasury said: “We had to make difficult choices to fix the foundations of the country.”
Last week, the government announced that the employers’ NI rate will rise from 13.8% to 15% from next April. The threshold at which firms will start to pay the tax has been lowered from £9,100 to £5,000.
The move is projected to raise about £25bn a year. It follows two NI cuts for workers under the last Conservative government which cut tax revenues by around £20bn.
Labour said that the rises were needed to “restore desperately needed economic stability to allow businesses to thrive”.
Murphy told BBC Radio 4’s Today programme: “There’s no argument with the government’s ultimate goals… simply the balance with which they pursued them.”
He said The Entertainer, which has 166 shops and employs 2,000 people, had chosen two new stores and done viability assessments on them.
“We were just about to initiate the work and unfortunately the changes to National Insurance in particular just tipped that balance so those stores will now not be opening.”
On Thursday, Sainsbury’s chief executive Simon Roberts said the changes to NI would add around £140m in costs to the supermarket group.
He said: “I don’t think you can shy away from the fact that, because of the changes in everyone’s cost base, it is going to feed through into higher inflation.”
At the weekend, Chancellor Rachel Reeves said she was not immune to criticism about NI, but added: “We’ve got to raise the money to put our public finances on a firm footing.”
Other businesses have said the tax rise could result in them expanding elsewhere other than the UK.
Arnab Basu, chief executive of Kromek, a radiation detection specialist, told the BBC plans by US president-elect Donald Trump to cut corporation tax for firms that make goods in the US, as well as sourcing cheaper energy through domestic drilling, made the country attractive.
“When you look at the proposed cuts in corporation tax – even without those cuts and indeed the new costs that have just come in in the UK on National Insurance and labour laws – when you’re taking investment decisions, the US is making a very compelling case for investment and expansion,” he said.
Trump said he would reduce corporation tax by 6% to 15% for firms manufacturing in the US.
On Tuesday, the owner of retailer Primark said it may invest beyond the UK because of the “weight of tax rises”.
George Weston, chief executive of Associated British Foods, which owns the chain, said: “We’re an international business as well, we have choices about where we will invest.”
A spokesperson for the Treasury said: “This government is committed to delivering economic growth by boosting investment and rebuilding Britain.”
