Nine major supermarket chains have written to chancellor Rachel Reeves to urge her to exclude shops from the proposed business rates surtax.

Coordinated by the British Retailer Consortium (BRC), the letter says that growing cost pressures on the retail industry mean that food inflation has been rising steadily over the past year and is expected to rise further.

This will increase headline inflation and limit the Bank of England’s ability to lower interest rates, it warns.

The supermarkets, which include Aldi, Tesco, Morrisons and Asda, said they are “acutely aware” of their responsibility to deliver affordable food to millions of households, but many people are struggling with the cost of living and will continue to do so until food inflation can be curbed.

The letter said that the UK grocery market is highly competitive with narrow profit margins that are well below those found in most other industries, with consumers benefiting from some of the lowest food prices in the developed world.

However, if the industry faces higher taxes in the coming budget, such as being included in the new surtax on business rates, the supermarkets said they will be unable to deliver value for their customers.

The supermarkets claimed that large retail premises are a tiny proportion of all stores, yet account for a third of retail’s total business rates bill, meaning another significant rise could push food inflation even higher.

The letter argued that larger shops support “hundreds of thousands” of jobs and drive footfall to nearby smaller businesses.

Commenting on the letter, Helen Dickinson, chief executive of the BRC, said that supermarkets are doing everything possible to keep food prices affordable but faced an “uphill battle” with over £7 billion in additional costs in 2025, including national insurance contributions and new packaging taxes.

“The chancellor has rightly made tackling inflation her top priority, and with food inflation stubbornly high, ensuring retail’s rates burden doesn’t rise further would be one of the simplest ways to help,” she added. “This would not cost the taxpayer a penny, with large office blocks and industrial plants, for whom business rates is a smaller proportion of their costs, paying a little more.”

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