Britain’s biggest retailer Tesco on Thursday reported record sales for the key Christmas season but shares in the supermarket and wider retail sector slid on concerns for the UK economy.

In the 19 weeks to January 4, comprising Tesco’s third quarter and Christmas trading period, UK sales jumped 4.6 percent to £17.9 billion ($22 billion) compared with a year earlier.

“We delivered our biggest ever Christmas,” chief executive Ken Murphy said in a trading statement.

“Our strong performance reflects the investments we have made, positioning Tesco as the UK’s cheapest full-line grocer for over two years,” he added.

Shares in the company dropped two percent on London’s FTSE 100 index, however.

Matt Britzman, analyst at stockbrokers Hargreaves Lansdown, noted that “the year ahead won’t be all smooth sailing for the retail giants, as the sector gears up to battle imminent tax hikes”.

The British Retail Consortium on Thursday warned that retailers could raise prices by an average of 4.2 percent in the second half of the year owing to the UK government’s tax-raising budget in late 2024.

“There is little hope of prices going anywhere but up,” said BRC chief executive Helen Dickinson.

Clothing-to-food retailer Marks and Spencer, which also posted strong results for the Christmas period, saw its shares slump nearly eight percent in midday deals.

M&S chief executive Stuart Machin said that “the external environment remains challenging, with cost and economic headwinds to navigate”.

The British pound has tumbled against the dollar this week on fears for the UK economy as inflation remains higher than hoped.

That has pushed up yields on UK bonds, increasing borrowing costs for the government and threatening to increase mortgage rates.

Record Christmas for Tesco, but concerns over tax hikes and U.K. economy linger