M&S reports strong festive sales but says UK firms will take hit from tax rises

Marks & Spencer has hailed a “good Christmas” with strong sales of food but warned that British businesses face higher costs from the government’s tax increases.

The UK retailer said sales at established food halls rose 8.9%, making its the top-performing grocer over Christmas, according to the analysts Kantar. Equivalent clothing, home and beauty product sales grew by 1.9% in the 13 weeks to 28 December.

M&S said sales records were broken, including its biggest ever day of food trading – on 23 December – while clothing, home, beauty online recorded their biggest week. M&S added 500 new product lines in its food departments, and meat, fresh fruit and veg and baked goods grew by double digits.

M&S partywear sales were up on last year, while denim and knitwear outperformed.

Stuart Machin, the chief executive, said: “This was another good Christmas for M&S, building on a strong performance in the prior year.” However, he added: “We’re not complacent.”

The company said: “The external environment remains challenging. As we enter the new year, the outlook for economic growth, inflation and interest rates is uncertain and the business faces higher costs from well-documented increases in taxation.”

The £40bn of tax rises announced in October’s budget hit businesses the most, with higher national insurance costs and a rise in the national minimum wage kicking in from April.

Retailers have warned the chancellor, Rachel Reeves, that they could be forced to cut thousands of jobs this year, as figures from the British Retail Consortium showed sales growth in the key Christmas period, between October and December, came close to flatlining.

Retailers face a £7bn increase in their costs in 2025, the lobby group has calculated, and many will raise their prices. Food prices are forecast to climb by 4.2% on average in the latter half of the year, while non-food items are likely to increase in line with inflation, which stands at 2.6%.

Separately on Thursday, Greggs, the UK’s biggest bakery chain, reported total sales rose by 11.3% to just over £2bn last year. Company-managed shops posted a 5.5% increase in sales at established outlets over the year, although growth slowed to 2.5% in the fourth quarter, reflecting “more subdued” footfall on high streets.

Greggs opened a record 226 shops over the year, closed 28 and relocated 53, and had 2,618 shops trading at the end of December. It is pushing ahead with a further 140 to 150 net openings this year.

It said its festive bake, the vegan festive bake and the new festive flatbread were popular, and that pizza has been selling strongly into the evening.

Roisin Currie, the chief executive, said: “Looking into 2025, employment costs will result in further overall cost inflation, although wage increases should provide support to consumers.”