Marks & Spencer has cautioned that it cannot rule out raising prices after absorbing an additional £120 million in costs resulting from Chancellor Rachel Reeves’s national insurance (NI) changes and forthcoming wage increases.

Chief executive Stuart Machin stated that the retailer would “do everything we can” to avoid passing these costs onto customers but acknowledged the company is confronting “pretty significant costs to mitigate against.”

M&S expects its tax bill to increase by £60 million next year to around £520 million following the Chancellor’s decision to raise employers’ NI contributions by 1.2 percentage points to 15% from next April, alongside lowering the threshold at which companies begin paying it.

Mr Machin commented, “We planned [for an increase] because it was well noted before the Budget that there was going to be some national insurance increase for business. We didn’t quite see the double whammy coming up.”

In addition to the higher costs from the NI changes, M&S anticipates a further £60 million increase in labour costs due to minimum wage rises—a cost the retailer had already accounted for.

Mr Machin said M&S would work “incredibly hard” to reduce expenses elsewhere to avoid price hikes for customers, noting that there are currently no plans to raise prices. He emphasised the company’s “good track record” of finding cost savings.

The warning comes amid alerts from retailers about an “avalanche of costs” following the Budget. Analysts suggest that the NI changes alone could add between £550 million and £600 million to UK grocers’ costs.

Earlier this week, the owner of Primark indicated it might explore options like introducing self-checkouts to reduce its labour bill.

The Budget has also sparked broader discontent among businesses. Recent figures show that two-thirds of bosses feel negative about the Budget, with the same proportion believing that Ms Reeves’s measures do not support growth, according to a survey by the Institute of Directors.

Mr Machin’s cautionary remarks coincided with M&S shares reaching their highest level since 2016, after the company reported a 17% rise in profit before tax and adjusting items to £408 million for the six months ending 30 September, surpassing analyst expectations of £360 million.

M&S shares surged as much as 7.4% on Wednesday morning.

The strong results are viewed as evidence that Mr Machin’s turnaround strategy for the retailer is on track, with both its food and clothing divisions posting growth over the six-month period.

Expressing optimism for the upcoming Christmas season, Mr Machin cited M&S research indicating that customers plan to spend more this year than last.

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M&S warns of possible price hikes as national insurance hike impacts costs