M&S Budget Attack|£150m Refund or Warehouse Tax Escape?

Chapter 1: What M&S is really asking for

Marks & Spencer's boss, Stuart Machin, has called the last two Budgets a disaster and written to the Chancellor with demands. He says they added £150 million a year to M&S's costs, and Chancellor John Healey has little room to give any back. Healey delivers his first Budget, the first under Prime Minister Andy Burnham, on 28 October.

After Machin spoke out, Sky News reported its understanding that there will be no further taxes on large online warehouses. That is a report, not an announcement. Tax changes are only confirmed on Budget day. Here is how we read it. The realistic win for M&S shareholders is defensive. It is about stopping new costs, not clawing back the £150 million Machin wants unwound.

A Chancellor this short of room is likelier to refuse a new tax than to refund an old one. Machin did not stop at the word disaster. He put a price on it. He says higher employer National Insurance and business rate changes added £150 million to M&S's annual costs. That sits on top of a tax bill he puts at around half a billion pounds. So the new costs alone equal about three-tenths of the tax M&S was already paying.

He says retail margins are wafer thin. Research by the British Retail Consortium and UKHospitality puts retail's tax at 72p for every pound of pre-tax profit. Their average across 11 main sectors is 50p. Yet the ask is narrower than the language. Machin wrote: 'I'm not asking the chancellor to rip up his fiscal rules.' He said Healey should 'start unravelling the mistakes of the last two Budgets'.

That is a request to win back part of the £150 million, not to cut the whole bill. The first lever on his list is employer National Insurance. The employer rate went from 13.8 to 15 per cent. That change came in April 2025. The pay level where employers start paying fell from £9,100 to £5,000. Machin wants that lower threshold reversed.

He also warns that workers' rights reforms must not harm flexible weekend jobs by cracking down on low-hours contracts. This lever reaches into how M&S staffs its stores. That same week, M&S said it is hiring 11,000 temporary staff for Christmas. Hours, shift patterns and contract lengths vary by location. Those are exactly the flexible roles Machin is defending. Machin calls for the lower threshold to be reversed.

The British Retail Consortium, the industry's trade body, has named its own figure. It wants the threshold raised from £5,000 to £6,000. The original cut was £4,100. So the ask would hand back £1,000 of it. Roughly a quarter. That is a sector bargaining for a slice, not a full reversal. Even a win on this lever would return only part of what Machin says was lost. If a refund comes, it is likely to be partial.

Chapter 2: The warehouse tax that was meant to help

Before he became Prime Minister, Andy Burnham suggested raising business rates on warehouses and out-of-town retail. The money could pay for tax breaks for high street shops. Retail Week described it as charging online giants. M&S is a high street name. Yet the big retailers lined up against it. John Lewis chair Jason Tarry warned against a 'warehouse tax'. Tesco said such a tax would be unfair and hurt retailers.

Machin argued that retail already pays a disproportionate share of business rates. The reason is who runs the warehouses. Property tax firm Ryan looked at the 10 distribution warehouses with the biggest rates bills. Seven are occupied by traditional retailers. Amazon accounts for the other three. Warehouses already pay a rate 33 per cent higher than small high street properties.

Tarry called it wrong to see retail as 'a zero-sum game of physical shops vs online'. On Ryan's figures, a tax pitched at online giants would land mostly on traditional retailers. For firms like M&S, it was a threat, not help. Then came the Sky News report. According to Sky's understanding, there will be no further taxes for large online warehouses, on top of those already in place.

Machin had framed his letter with restraint. He wrote: 'I know money is tight.' The Treasury's spokesperson answered with growth. 'We want Britain's retailers to thrive,' the spokesperson said. The way to tackle cost pressures, it said, 'in the long term is through growth'. Look at what each side leaves out. Sky's wording keeps the existing warehouse premium in place. The Treasury points to the long term.

If the report holds, M&S avoids a new bill. The report says nothing about the old one. So the defensive half of our reading looks close to won, on Sky's report. That leaves one open question. Will any of the £150 million come back?

Chapter 3: Who would pay for a refund

A Treasury that backed off one tax might look ready to give. The numbers say otherwise. Fiscal headroom is the margin by which the government meets its borrowing rules. KPMG projects it will shrink to roughly £12 billion. At the spring forecast it was £23.6 billion. Close to half of it gone. Yields on ten-year gilts, the government's bonds, touched 5.515 per cent in one day's trading.

That was the highest since July 2007. Healey has told his party 'we will meet the fiscal rules'. KPMG says that leaves 'limited scope to provide significant support for growth'. There is a second problem. Retailers urged Healey not to bring in a warehouse tax to help pay for Burnham's promised 20 per cent rates cut for pubs. If that tax is off, the pub cut has to be paid for another way.

KPMG says the Chancellor may need to consider other tax measures. This is where our defensive reading wobbles. Avoiding a new tax is not the same as avoiding a higher bill. The retail consortium is asking Healey to freeze the inflation-linked increase in business rates. Its chief executive urged him to pull back from 'another increase in business rates'.

So M&S could escape the warehouse tax and still face higher rates. There is a counterweight. Healey met bank bosses and told them he has yet to decide on raising taxes on their industry. That has fed City speculation that he will target banks. Other tax measures may land outside retail. Even so, that money would first have to rebuild a buffer KPMG says is close to half gone, and pay for the pubs.

A refund to big retailers comes after both. That makes it the hardest item on Machin's list. Some relief is being weighed. Healey is said to be considering a higher threshold for small business rates relief. It currently exempts premises with a rateable value below £12,000. Uprating it with inflation would take it to £17,096. Burnham's pub cut is worth about £1,100 a year to the average firm.

The government says more than 750,000 retail, hospitality and leisure properties already pay lower business rates. Big stores sit on the other side. The retail consortium wants shops taken out of the top band of business rates. Tarry calls department stores and supermarkets anchor tenants. He warned that 'Penalising anchor retailers through higher business rates' risks harming smaller shops nearby.

So the help on the table is built for small premises, such as coffee shops and smaller retailers. Even if Healey gives, the gift is more likely to reach a corner café than an M&S store.

Chapter 4: The verdict

Back to Machin's charge sheet and its £150 million. Our view has sharpened. M&S looks likelier to leave 28 October having dodged a new tax than having won any of that money back. If anything does come back, it is likely to be small. One number will test that first: the employer National Insurance threshold, now £5,000. Rumours are not confirmation. The answer comes on Budget day.

If it stays at £5,000, the refund half of our reading holds. If it rises, even to the £6,000 the retail consortium wants, we were too gloomy. Employers like M&S would win back part of their staff costs. The Treasury would have to find that money elsewhere, from a buffer KPMG says is close to half gone.

Informational only, not investment advice. Figures and quotes come from the linked reports.