Further taxes on warehouses ruled out ahead of budget after M&S and John Lewis issue warnings

Further taxes on warehouses have been ruled out by the chancellor ahead of the budget, Sky News understands, after a warning was issued the boss of a high street giant.

John Lewis Partnership chair Jason Tarry warned the government against against imposing a "warehouse tax" as he and another high street boss called on John Healey to reform business rates, saying the tax burden risks heaping more pressure on high street shops.

While he acknowledged there was a case for "online retail shouldering a fairer share of tax", Mr Tarry wrote in the Telegraph it was wrong to see modern retail as "a zero-sum game of physical shops vs online".

Meanwhile, Marks & Spencer chief executive Stuart Machin argued the retail sector already pays a disproportionate share of business rates.

Shortly before he became prime minister, Andy Burnham indicated he thought an increase in business rates for warehouses and out-of-town retail developments could pay for tax breaks for high street shops.

But Sky News understands there will be no further taxes for large online warehouses, on top of those already in place.

Under the current rules, properties such as warehouses used by online giants pay a 33% higher tax rate than small high street properties.

An HM Treasury spokesperson said: "We want Britain's retailers to thrive, and the chancellor has been clear that the way to tackle cost pressures in the long term is through growth.

"That is why he is focused on creating the conditions for businesses to invest, expand and create jobs in every postcode - and we are already backing firms through business rates cuts, a cap on corporation tax and a £4.3 billion package to help businesses manage costs and keep investing.

"As has always been the case, decisions on tax are a matter for the chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals."

The warnings by the heads of two leading UK retailers came ahead of John Healey's first budget as chancellor on 28 October amid a challenging economic environment for the government.

M&S chief executive Stuart Machin said the previous two budgets under ex-chancellor Rachel Reeves were a "disaster", adding: "At M&S, we were left facing £150m of new costs each year, on top of a tax bill of around half a billion pounds."

He called for the government to reverse the cut in the threshold at which employers start paying National Insurance, arguing the change had damaged retailers.

Mr Machin said he had written to Mr Healey directly "to set out what needs to change, and why it can't wait".

He suggested six ways the chancellor "could get Britain growing by taking the handcuffs off business and putting money back in people's pockets".

They included a call to "fix business rates", with Mr Machin arguing the retail sector pays a disproportionate share.

He said retail accounted for 5% of the economy but paid more than a fifth of all business rates, calling the situation unsustainable.

"It's right to support the pubs, bars and music venues on high streets that bring our towns to life," he said.

"But if you do that by taxing supermarkets, you're paying for a cheaper pint by loading costs on to the weekly shop."

Meanwhile, the IPPR think tank has proposed imposing a 2% tax on online sales to support bricks-and-mortar businesses.

But Mr Tarry, the chairman of John Lewis, which owns Waitrose, said the proposals were based on "a fundamental misunderstanding of how modern high streets work".

He said: "Major department stores and supermarkets, including our 36 John Lewis stores and hundreds of Waitrose branches, act as vital anchor tenants.

"They generate the primary footfall that sustains surrounding independent shops, pubs, bakeries and cafes.

"Penalising anchor retailers through higher business rates risks harming the smaller businesses operating in their orbit."

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There was a case for "online retail shouldering a fairer share of tax", Mr Tarry admitted, but said it was wrong to view modern retail as "a zero-sum game of physical shops vs online".

Instead, he urged the government to reform the "archaic" business rates system to support businesses that make "an additive contribution to local civic life".

With inflation and borrowing costs being pushed higher amid the fallout from the Iran war, Mr Healey will not have much room for manoeuvre while keeping to the fiscal rules the government has set.

He also faces pressure to hike defence spending and invest in public services, while trying to provide the "breathing space" against the rising cost of living promised by Prime Minister Andy Burnham on his first day as prime minister.

(c) Sky News 2026: Further taxes on warehouses ruled out ahead of budget after M&S and John Lewis issue warnings