Ocado’s chief executive Tim Steiner has blamed Chancellor Rachel Reeves’s tax rises for pushing up the price of groceries, warning it is “unrealistic” to expect businesses to absorb significant increases in labour costs without passing them on to consumers.
Speaking after the UK’s annual inflation rate rose to 3.6% in June, Steiner said the combination of higher employer National Insurance Contributions and a 6.7% increase in the minimum wage was fuelling price pressures in food retail and distribution.
“Am I surprised to see inflation coming through? Of course not,” he said. “You can’t increase the cost of labour in food production, food distribution and food retailing in the way that we have, with National Insurance increases and the minimum wage increases, and not expect to see prices move. That would have been a wholly unrealistic expectation if anyone had that.”
Food inflation ticked up from 4.4% to 4.5% in June, compounding the impact on households already grappling with rising grocery bills.
Retailers and industry groups have warned that the fiscal measures announced in Reeves’s autumn budget—including a £25 billion hike in employer NICs—would inevitably lead to higher prices on the shelves, as companies pass on increased labour and input costs.
Despite the pressures, Steiner insisted that Ocado Retail—the company’s online grocery joint venture with Marks & Spencer—was working to keep prices in check.
The average customer basket value rose by just 0.7% to £124.19 in the six months to 1 June, which the company said reflected a 1.4% increase in average item prices, far below the national food inflation rate.
“It’s not good to make people more expensive,” Steiner said, referencing the increased costs employers now face.
His comments come as Ocado Group reported a sharp turnaround in its financial results, posting a £612 million profit for the first half of the year, compared with a £153 million loss during the same period in 2024. The swing was largely driven by a revaluation of its stake in Ocado Retail.
Revenues in the group’s technology solutions business, which sells warehouse automation systems to global retailers, climbed 13.2% to £674 million. Sales at Ocado’s UK retail division rose 16.3% to £1.53 billion, although the unit posted a £25 million loss after tax.
Industry experts echoed Steiner’s warning that rising input costs are hitting retailers across the board. Balwinder Dhoot, director of the Food and Drink Federation, said:
“The pressure on food and drink manufacturers continues to build. With many key ingredients like chocolate, butter, coffee, beef and lamb climbing in price—alongside high energy and labour expenses—these rising costs are gradually making their way into the prices shoppers pay at the tills.”
Steiner also addressed the ongoing £190 million payment dispute with Marks & Spencer, describing the dialogue as “constructive”. M&S has withheld the payment amid a legal row over unmet performance targets related to the joint venture.
“We’ve got a very strong working relationship with them and spent a lot of time with them in the last few weeks,” Steiner said.
He added that Ocado had seen “very minimal, if any” disruption from the cyberattack that recently affected M&S systems.
Investors welcomed the results, sending Ocado shares up more than 12% when markets opened on Thursday.
With inflation, taxation, and wage costs continuing to squeeze margins, the political and economic pressure on the government is mounting—especially as food price hikes directly affect millions of consumers and voters. As speculation grows around further fiscal tightening in the Chancellor’s next Budget, retailers are warning that affordability may become the next crisis on Britain’s high streets.
