Halfords begs Rachel Reeves for help as it faces £23m employer NI hit | UK | News
Rachel Reeves’s employer national insurance (NICs) hike is set to cost Halfords an extra £25m which it hopes it can pass onto customers of its Autocentres car repair arm.
The retailer has been praised by motorists for providing a cheap alternative to simple car maintenance, including replacing windscreen wipers and blown headlamp bulbs.
It said next April’s rise in national insurance contributions (NICs) and the minimum wage increase would hit its bottom line, as it employs over 12,000 staff.
Around £9m of the extra cost has already been factored into Halford’s plans for 2025-26 and extra costs would have to be met through charging higher prices to customers of its Autocentres arm.
Graham Stapleton, chief executive of Halfords, said: “The cost implications from the recent UK Budget are particularly acute for a specialist retailer that provides expert advice and assistance to customers, face to face.
“It will inevitably be challenging to fully mitigate a single-year cost increase of this magnitude, particularly in the retail business where many of our product categories are discretionary and/or big ticket and substantial cost has already been removed in recent years.
“We anticipate being able to pass through wage inflation more easily in the Autocentres business, where a greater proportion of revenue relates to services.”
Halfords is now calling on the Government to overhaul the Apprenticeship Levy.
Halford’s half-year pre-tax profits fell by 23.3 per cent to £17.8million in the six months ending September 27, 2024.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said the £23m cost-cutting target was, “within reach”.
“With £21m already secured in the first half, this target now looks well within reach, especially as freight costs are expected to be at the lower end of previous guidance.
“Halfords tries to stand out from its competition by delivering expert advice and assistance to customers, face-to-face, with more than 12,000 staff on the books. That means the government’s recent decision to hike employers National Insurance contribution is set to really bite, adding around £23mn of direct labour costs next year, so the group will have to pedal even harder to try and offset these additional costs.”