"LONDON, Jan 10 (Reuters) - Britain's major retailers, such as Tesco, Sainsbury's, M&S, and Next, are intensifying efforts to enhance efficiency through automation and other methods to mitigate the impact of increasing costs on their pricing strategies.
Facing challenges in growth, the new Labour government proposes raising employer taxes to generate funds for infrastructure and public services, a move criticized by the business sector.
Retailers anticipate that upcoming social security payments, a rise in the national minimum wage, packaging levies, and higher business rates in April will collectively cost the industry £7 billion ($8.6 billion) annually.
Concerns about broader economic repercussions have led to a sharp decline in retail stock prices and an increase in government borrowing costs.
While larger players in the retail sector have more flexibility to adjust, thanks to prior profits, analysts warn that smaller businesses could face significant pressure.
Clothing retailer Next predicts a £67 million surge in costs by the end of January 2026 but remains optimistic about profit growth.
To offset the increased wage bill, Next plans a 1% price hike, considering it "unwelcome" yet lower than the general UK inflation rate. The company also aims to improve operational efficiencies in warehouses, the distribution network, and stores.
CEO Simon Wolfson emphasizes the inevitability of automation in the retail sector, stating that the justification for such projects is balancing the savings against the costs of mechanization, AI, or software.
Supermarket giant Tesco is also investing in automation, with plans to launch a robotic chilled distribution center in Aylesford, southeast England, this year.
Sainsbury's, the second-largest grocer, is promoting the use of SmartShop handheld self-scanning technology for shoppers.
Some investors, including those in Sainsbury's and Marks & Spencer, empathize with smaller UK retailers, who lack the resources to offset the impact of tax hikes through technology investment.
Despite facing a £250 million annual increase in employer national insurance contributions, Tesco's CEO Ken Murphy expresses confidence in managing the situation.
Both Tesco and Sainsbury's are pursuing cost-saving strategies to navigate the challenges ahead, aiming to achieve substantial savings in the coming years.
M&S, dealing with £120 million in additional wage costs, aims to minimize passing on the burden to consumers by enhancing operational efficiency and supply chain modernization.
Smaller players may have to resort to price hikes as a last resort. Data from the British Chambers of Commerce indicates that over half of surveyed businesses plan to increase prices, potentially impacting inflation containment and economic growth.
Some retailers, like the British discount chain, warn of store closures due to the added financial strain posed by recent budget changes.
($1 = 0.8149 pounds)"