Citi has assessed the UK Budget and its implications for the retail sector, noting that potential headwinds from business rates appear lower than previously expected.
Citi believes food retailers are likely to be more exposed than general retailers because of their larger property footprints - given new rules that aim to cut rates for retail, hospitality and leisure properties valued below £500,000, funded by higher rates on sites above that threshold.
Citi had already modelled a business-rates headwind for Tesco PLC (LSE:TSCO) and J Sainsbury PLC (LSE:SBRY). It now expects that impact to be materially lower than first assumed. The broker added that the rise in the minimum wage to £12.71, up 4.1%, aligns with prior guidance and therefore does not create an additional cost headwind.
Broader consumer sentiment remains mixed in Citi’s view.