Primark CEO Urges Caution on Tax Hikes Ahead of Budget

The chief executive of Associated British Foods (ABF), the parent company of Primark, has issued a plea to Shadow Chancellor Rachel Reeves. He urged her to refrain from imposing a tax-heavy budget similar to last year’s, which he claims had a detrimental effect on retail sales. As the chancellor prepares for her budget announcement on November 26, George Weston cautioned, "don’t do it again."

Weston emphasized that any tax increases could significantly dampen consumer confidence. He suggested that instead of implementing broad VAT or income tax hikes that would burden average households, Reeves should focus on taxing wealthier individuals. He stated, "tax the rich folks" to alleviate pressure on everyday consumers.

Despite the concerns, Weston reported that Primark's Christmas merchandise is performing well in the UK, indicating that the retailer currently has "some wind in our sails." However, he warned that the overall outlook for consumer spending could be ominous. He shared that sales for Primark had experienced a downturn following last year's budget announcement, stating, "I carry scars from [that] budget." This downturn in sales was particularly pronounced leading up to the Christmas season.

As ABF navigates this challenging environment, it is contemplating a strategic move to separate Primark from its food division, which includes renowned brands like Twinings and Kingsmill. This decision comes as part of a broader strategy aimed at maximizing long-term value amid a difficult external market.

The Weston family is ranked sixth on the 2025 Sunday Times Rich List, with a reported wealth of nearly £18 billion. ABF itself has a market valuation of approximately £16 billion. Analysts from Panmure Liberum have posited that a standalone Primark could be valued at over £15.5 billion, while the food division might exceed £3 billion in worth.

Earlier this year, Primark's CEO, Paul Marchant, resigned following allegations concerning his behavior in a social context. This leadership change coincided with ABF's recent announcement of a decline in sales and profits, attributed to rising costs in its sugar and agriculture divisions and the closure of its Vivergo bioethanol facility.

For the fiscal year ending September 13, ABF reported a pre-tax profit drop of over a quarter, plummeting to £1.4 billion, with revenues declining by 3% to £19.4 billion. The sugar division faced significant challenges, recording a £205 million loss and a 12% revenue drop to £2 billion, largely influenced by the closure of Vivergo, along with increasing costs and falling sugar prices.

On a more positive note, Primark's sales saw a modest increase of 1%, reaching £9.5 billion, reflecting resilience in its retail operations despite the overall economic challenges.

As the retail and food & drink industries navigate a complex landscape, the decisions made in the upcoming budget will be critical. The balance between maintaining consumer confidence and ensuring fiscal responsibility will be a tightrope for the government. With the holiday shopping season approaching, the implications of tax policies on both retailers like Primark and consumers are more pertinent than ever.

George Weston’s comments underscore the significant relationship between government tax policies and consumer spending patterns. As ABF contemplates structural changes to enhance shareholder value, the future of Primark remains closely tied to broader economic conditions and governmental decisions. The upcoming budget will undoubtedly be a pivotal moment for both the retail and food industries, shaping the landscape for Christmas trading and beyond.