Britain's largest supermarket chain has issued a warning to Chancellor Rachel Reeves about the potential impact of next month's Budget on food retailers if taxes are raised once again.
Tesco's chief executive Ken Murphy has called on the Labour Government to avoid measures that would increase the burden on grocers, with many supermarket giants criticising the recent hikes to National Insurance and the National Living Wage.
Mr Murphy said: "What we'd love to see is a Budget that's pro-growth and pro-jobs which, as a result, will help customers with the cost of living."
The retail boss expressed concern about consumer anxiety regarding future economic conditions, emphasising the challenging environment facing food retailers.
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The Tesco boss added: "As a food retailer, we operate in a very competitive and very tough environment, and I think our one ask is don't make it harder for the industry to deliver great value for customers."
He warned that previous budgetary decisions had already imposed significant financial pressures on the sector.
Mr Murphy said: "In the last Budget, the industry incurred substantial additional operating costs. We're doing our best to deal with them but enough is enough."
Despite his concerns about additional regulatory burdens, Mr Murphy revealed that Tesco anticipates annual profits to reach between £2.9billion and £3.1billion.
This represents an upward revision from earlier projections of £2.7billion to £3billion. The supermarket giant reported that adjusted operating profit climbed 1.6 per cent to £1.67billion during the first six months of 2025.
The UK’s biggest supermarket has warned ministers about the possible effects of next month’s Budget on the food retail sector
|GETTY
This performance was driven by robust UK sales, which surged 4.9 per cent compared with the previous year.
The improved financial outlook comes as British households continue to grapple with stretched budgets. Tesco noted that consumers are increasingly prioritising value while shopping.
The upgraded forecast appears to reflect Tesco's ability to attract customers despite the challenging economic climate affecting British families.
The supermarket giant faces annual costs of approximately £235million from increased employer national insurance contributions, while new packaging levies have added roughly £90million to operational expenses.
Tesco faces £235million in annual costs from higher employer NI and £90m from new packaging levies
|GETTY
These substantial overheads come as the grocery industry navigates an intensely competitive landscape.
Mr Murphy acknowledged the fierce rivalry among British supermarkets, noting that price competition shows no signs of abating.
The chief executive anticipates this competitive pressure will persist throughout the remainder of the year.
Tesco's plea for budgetary restraint reflects broader industry concerns about mounting operational costs.
Mr Murphy's comments suggest the sector's capacity to shoulder additional financial burdens may be reaching its limits. The retailer has implemented cuts across approximately 6,500 items.
These reductions average around nine per cent compared with the previous year's pricing. The supermarket's fresh food category has performed particularly well.
Furthermore, Mr Murphy attributed this success to increased home cooking among British consumers. Own-brand products have seen especially strong demand as shoppers prepare meals from scratch.
Premium offerings have also exceeded expectations, with Tesco Finest experiencing a 16 per cent surge in sales year-on-year.
Asda’s chairman has previously urged Rachel Reeves to avoid imposing further taxes in the upcoming Budget, warning that additional fiscal pressure could worsen the impact of food inflation on consumers.
Allan Leighton said the Chancellor should stop "taxing everything in some way, shape or form" and focus instead on investing in Britain to drive growth.
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Asda's chairman has previously criticised the government's approach to enterprise | ASDAUnseasonably warm weather boosted sales of seasonal items including barbecue essentials, picnic supplies and sparkling wine.
These categories benefited from extended summer conditions.
Looking ahead to the festive period, Mr Murphy expressed optimism about Christmas trading.
He anticipates consumers will adopt an "affordable and manageable" approach to seasonal spending.
The chief executive remains confident in Tesco's positioning.
He acknowledged that the "incredibly competitive" market environment will continue challenging retailers throughout the year.
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