Shares in UK grocers, including Marks and Spencer Group PLC (LSE:MKS) and Tesco PLC (LSE:TSCO), were among the big risers on Thursday morning on the back of a report suggesting the government is considering exempting supermarkets from an increase in business rates.
The Financial Times reported that the Treasury is poised to remove larger retailers from the top band of business rates, following intense lobbying pressure from supermarkets, with Chancellor Rachel Reeves having met leaders from the sector recently.
Recently reignited food inflation is also likely to be a key influence on the Chancellor’s decision, with knock-on implications for Bank of England’s interest rates, which have been coming down more slowly than many would hope due to elevated UK inflation.
Global food and fuel prices have been a key contributor, with the most recent official data showing food prices climbing for the fifth consecutive month in August, hitting a 20-month high of 5.1%.
Economists have warned that this resurgence in food inflation risks slowing progress on bringing overall inflation back to target.
Industry figures published this week pointed to food inflation holding steady in September, with the British Retail Consortium saying shop prices are being pushed higher by a combination of global commodity pressures and domestic cost burdens, including higher national insurance contributions and wage costs introduced in last year’s budget, alongside a new levy on plastic packaging that came into effect in October.
Tesco shares rose 4.1%, helped by half-year results, while Marks & Spencer was up 2.7%, J Sainsbury PLC (LSE:SBRY) B&Q owner Kingfisher PLC (LSE:KGF) both rose around 1%, Next PLC (LSE:NXT) 0.4% among FTSE 100 firms.
Among mid-caps, Sports Direct and House of Fraser owner Frasers Group PLC (LSE:FRAS), AO World PLC (LSE:AO.), Pets at Home Group PLC (LSE:PETS), Dunelm Group PLC (LSE:DNLM) and Moonpig Group PLC (LSE:MOON) were all up over 1%.