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The Entertainer halts new store plans due to budget’s national insurance hike

November 9, 2024

The Entertainer, one of the UK’s largest toy retailers, has abandoned plans to open two new stores following the government’s decision to raise employer National Insurance (NI) contributions.

Chief Executive Andrew Murphy explained that the increased costs have also led to a hiring freeze at the company’s head office.

The decision underscores mounting business concerns over the Budget’s changes, which increase the NI rate for employers from 13.8% to 15% from next April, with the tax threshold reduced from £9,100 to £5,000. The policy is expected to raise around £25 billion annually to stabilise public finances, following revenue cuts under the previous government.

Speaking to BBC Radio 4’s *Today* programme, Murphy said, “There’s no argument with the government’s ultimate goals… simply the balance with which they pursued them.” He highlighted that The Entertainer had completed viability assessments for two new locations, but the NI rise shifted the financial outlook, leading to the store closures.

Other major companies, including Sainsbury’s and Marks & Spencer, have hinted that increased NI rates may lead to higher prices as businesses seek to manage rising costs. Sainsbury’s CEO Simon Roberts estimated that the supermarket chain faces £140 million in additional costs, warning, “It is going to feed through into higher inflation.”

Labour has defended the tax hike as a means to “restore desperately needed economic stability.” Chancellor Rachel Reeves responded to the criticism, stating, “We’ve got to raise the money to put our public finances on a firm footing.”

Some businesses are contemplating expanding operations outside the UK in response to rising employer costs. Arnab Basu, CEO of Kromek, noted that planned cuts to US corporation tax under President-elect Donald Trump, coupled with lower energy costs, make the US an increasingly attractive environment for investment.

Similarly, Associated British Foods, the parent company of Primark, has suggested that tax increases may prompt it to prioritise growth beyond the UK. CEO George Weston commented, “We’re an international business as well, we have choices about where we will invest.”

The Treasury defended the NI changes as essential for economic recovery. “This government is committed to delivering economic growth by boosting investment and rebuilding Britain,” a spokesperson said.

The Entertainer’s decision highlights a broader trend of UK businesses reassessing domestic investments as they navigate the evolving tax landscape and rising operational costs.