Frasers Group has warned that Rachel Reeves’s budget will cost it at least £50 million next year, likening the impact on retailers to a “punch in the face”.

Michael Murray, the chief executive of the British retail group, said the recent fiscal measures will force businesses to cut costs and could hit consumer confidence to such a degree that sales are already suffering.

“This budget is devastating,” Mr Murray said. “Not only are they adding at least £50 million to our costs next year, but consumer confidence has also been destroyed.” He blamed the measures for weaker-than-expected sales at Frasers, which owns House of Fraser and Sports Direct, and for forcing the company to downgrade its annual profit forecast by £25 million to between £550 million and £600 million.

The budget, introduced by the Chancellor, includes a rise in employers’ National Insurance contributions and an increase in the minimum wage. Retailers now fear these costs will pile further pressure on margins, with even robust groups like Frasers feeling the strain. Moreover, the government’s decision to delay business rates reforms until 2026 compounds concerns that property taxes will remain high.

Mr Murray said the budget had shattered trade and confidence in the run-up to and following its announcement. “It’s absolutely budget-related,” he said. “Consumer confidence significantly fell before it and hasn’t recovered since.”

The market responded sharply to the warning. Frasers’ shares tumbled by almost 12 per cent on Thursday, shortly after the retailer learned it would be relegated from the FTSE 100 index. Mr Murray acknowledged that dropping out of the blue-chip index was “disappointing” but insisted the company remained focused on moving its brands upmarket.

In addition to the new National Insurance regime, the increase in the minimum wage to £12.21 an hour from £11.44 further raises operating costs. Frasers is now wrestling with how to absorb these expenses, considering a combination of cutting costs elsewhere and raising prices.

“We’re really going to have to focus on mitigating these increases in what is already a challenging environment,” Mr Murray said. He also suggested other retailers, particularly smaller ones, would struggle to cope with the hit.

Chancellor Reeves argues that the budget provides the stability needed to rebuild public services and spur future growth. A Treasury spokesman said: “We delivered a once-in-a-parliament budget to wipe the slate clean, repair our public services, and give businesses the economic stability they need. Without our action, retail relief on business rates would have ended next April.”

Frasers, founded by Mike Ashley—Mr Murray’s father-in-law and the company’s largest shareholder—has been active in strategic investments and attempted takeovers, including a failed bid for Mulberry. It is currently locked in a boardroom standoff at Boohoo, where it aims to install Mr Ashley as chief executive, though Mr Murray insisted these disputes had not distracted management.

As retailers brace for the impact of higher taxes, rising wage bills, and tepid consumer sentiment, the stakes are high. Many will be forced to make tough choices about staffing, pricing, and investment just as the critical festive season approaches.