Appliance and electricals firm with Telford recycling base issues warning over price rises following budget

AO World, which has its large-scale appliance recycling and outlet operation in Halesfield, Telford estimates its wage bill will go up by around £4 million due to the increase in employers’ national insurance contributions (NICs) and about another £4 million with next April’s minimum wage rise.

The comments came on the back of the firm's interim results released today (November 26), which showed adjusted profit before tax of £17m, up £4m or 30% year-on-year, for the six month period up to September 30. Revenues were also 6% higher at £512million.

In a statement published with the figures, the company said that including "indirect costs where the impact remains to be seen", the total cost to the company will likely be more than £8m, adding that they were "working hard to mitigate the impact of this to overall profitability".

Founder and chief executive John Roberts told the news agency PA that the group is likely to have to raise prices and make savings to mitigate the impact, but said it was too early to say by how much and stressed the group will also look to use growth and efficiencies to counter the blow.

“This whole Budget is extremely inflationary for retailers,” he said.

"Is anyone naive enough to think that will not follow into pricing? 

"From our point of view, it’s not about cost savings and taking headcount out, it’s about how do we drive efficiencies and how do we grow as a business."

AO World said it is also bracing for consumer spending to pull back as retailers are forced to raise prices.

“That’s normally what happens in an inflationary environment but, from our perspective, the majority of what we sell is non-discretionary,” said Mr Roberts.

"If your fridge breaks, you’ll probably buy another one.”

Retailer Halfords also flagged that it may need to pass on the Budget cost impact to consumers as it faces a £23 million hit. The high street automotive parts and service retailer reported a 23.3% fall in profits to £17.8m in its half-year figures, which also included £14.6m of cost savings delivered over the past six months, which it said would help to mitigate £14.8m of inflation pressures.