M&S: Marks and Spencer warns of potential UK price hikes across food and clothing - as share price drops

• M&S faces a £120 million increase in its bills due to higher minimum wage and employer national insurance rates
• The retailer aims to minimise price hikes but acknowledges challenges in offsetting rising costs
• Despite strong Christmas sales, M&S shares dropped by 8% amid uncertainty about the economic outlook
• CEO Stuart Machin emphasised the need for careful recruitment and cost-saving measures

A major British retailer has warned that it may have to raise prices across its range.

M&S is among some of Britain’s biggest retailers to be facing a bigger tax bill this year, as a result of measures including a higher minimum wage for staff and an increase to the rate of employer national insurance.

Both of those measures, announced as part of Chancellor Rachel Reeves’ maiden Budget in October 2024, are set to take effect in April.

How much could M&S prices rise by?

The M&S boss has insisted he will pass on “as little as possible” in costs to customers, but that mitigating rising employment taxes will not be easy.

The retailer previously revealed it will be facing a £120 million hit to its wage bill, but said it would look to hold prices “as much as we can”, though it was having to look across the business to find ways to offset the impact.

CEO Stuart Machin said: “I want to pass on as little as possible of that to our customers. It’s not easy, but I really want us to hold our prices as much as we can.”

Earlier this week, clothing retailer Next announced it will be implementing an "unwelcome" 1% price hike as it looks to offset a similar financial burden.

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M&S has said it will focus on identifying supply chain savings and improving operational efficiency to address rising costs.

When asked if job cuts would result from the Budget measures, Machin said: “This is going to be a challenge for us. I do not see in M&S big job losses. We’re a growing business. We’ve got lots to do.”

But he also emphasised that the company would need to be “really diligent” in its recruitment efforts moving forward.

Why might prices increase?

M&S’s Christmas sales surged, driven largely by its food division, which enjoyed its biggest-ever trading day during the period.

The retailer made £4.06 billion in sales during the three months to 28 December, up 5.6% compared to the same period the year before. So why might prices be raised?

It’s all to do with businesses facing bigger expenses bills this year from measures including higher wages for staff and an increase to the rate of employer national insurance.

M&S is one of Britain's largest retailers facing a higher tax bill this year due to measures such as an increased minimum wage for staff and a rise in the employer national insurance rate.

More than 70 businesses that wrote to Chancellor Rachel Reeves last year to warn that changes announced in the October Budget meant price hikes were a “certainty”.

M&S has already previously disclosed a £120 million increase in its wage bill due to recent Budget measures.

Shares in the company dropped by as much as 8% on Thursday (9 January), following the company's warning that the economic outlook "remained uncertain" for the year ahead, overshadowing its strong Christmas trading results.

What do you think about M&S's plans to handle rising costs and potential price hikes? Do you think the retailer will be able to manage without passing too much onto customers? Share your thoughts in the comments section.