The boss of Tesco has urged Rachel Reeves not to « make it harder » for the grocery sector to maintain low prices for customers ahead of the autumn Budget, despite projecting profits could exceed £3billion this year.
Household budgets remain squeezed and shoppers are increasingly seeking value, says the UK’s largest supermarket. Ken Murphy, Tesco’s CEO, said he hopes that the autumn Budget would not impose additional burdens on grocers already grappling with significantly higher business costs. He said: « What we’d love to see is a Budget that’s pro-growth and pro-jobs which, as a result, will help customers with the cost of living.
« We know that people are worried about what lies ahead and we’re seeing that in the consumer sentiment. As a food retailer, we operate in a very competitive and very tough environment, and I think our one ask is don’t make it harder for the industry to deliver great value for customers.
« In the last budget, the industry incurred substantial additional operating costs. We’re doing our best to deal with them but enough is enough. »
Tesco said the increased rate of employer national insurance added approximately £235million to its annual costs, while new packaging taxes contributed around £90million.
However, the supermarket announced on Thursday that its profits for the year were likely to surpass previous estimates.
The company now anticipates underlying earnings for the full year to be between £2.9billion and £3.1 billion, an increase from its previous forecast of between £2.7billion and £3billion.
This follows a 1.6% rise in adjusted operating profit to £1.67billion for the first half of 2025, compared with the same period last year, driven by a 4.9% surge in UK sales.
Mr Murphy said customers were reacting positively to the company’s efforts to reduce prices on hundreds of products, leading to an increase in the volume of items added to shopping baskets.
This was especially true for fresh food, which is largely own-brand, indicating a trend towards more consumers cooking from scratch at home.
Across the UK, Tesco has slashed the prices of approximately 6,500 products compared to last year, with an average reduction of around 9%.
An extended spell of warm weather also attracted more shoppers purchasing summer ranges such as barbecue and picnic food and sparkling wine.
Sales of Tesco Finest, the supermarket’s premium own-brand line, soared by 16% year-on-year, with about 300 new and improved products.
Mr Murphy expressed optimism for the festive season, stating that Tesco was « betting on a good Christmas », with consumers likely to approach the holiday period in an « affordable and manageable » manner.
The chief executive noted that the industry remains « incredibly competitive » amid an escalating price war among rival supermarkets, and he expects this to continue into the second half of the year.
