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Fears living wage could devastate small retailers and push up prices Fears living wage could devastate small retailers and push up prices
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The government’s new national living wage will have a devastating impact on independent retailers and could lead to price rises for shoppers, analysts have warned.The government’s new national living wage will have a devastating impact on independent retailers and could lead to price rises for shoppers, analysts have warned.
Store executives and industry experts said that the retail sector, which employs vast numbers of staff on or just above the national minimum wage, would be forced to cut jobs, reduce staff working hours and pass on additional costs to their shoppers when the wage, announced in Wedensday’s budget, is introduced next April at £7.20 an hour for the over-25s.Store executives and industry experts said that the retail sector, which employs vast numbers of staff on or just above the national minimum wage, would be forced to cut jobs, reduce staff working hours and pass on additional costs to their shoppers when the wage, announced in Wedensday’s budget, is introduced next April at £7.20 an hour for the over-25s.
Related: George Osborne introduces new 'living wage' but cuts working-age benefitsRelated: George Osborne introduces new 'living wage' but cuts working-age benefits
Around one in 10 UK workers are employed in retail and hundreds of thousands are so poorly paid that they rely on in-work benefits to make ends meet, despite working full time.Around one in 10 UK workers are employed in retail and hundreds of thousands are so poorly paid that they rely on in-work benefits to make ends meet, despite working full time.
The bosses of major retail chains warned that any rise in basic pay for workers is likely to mean cuts in other benefits, such as annual bonuses, staff discounts or pension payments. The mandatory pay rise for workers aged over 25 comes amid tough competition on the high street and online. The big four grocers are under substantial pressure to keep costs down so they can cut prices to stop shoppers switching to discounters such as Aldi and Lidl.The bosses of major retail chains warned that any rise in basic pay for workers is likely to mean cuts in other benefits, such as annual bonuses, staff discounts or pension payments. The mandatory pay rise for workers aged over 25 comes amid tough competition on the high street and online. The big four grocers are under substantial pressure to keep costs down so they can cut prices to stop shoppers switching to discounters such as Aldi and Lidl.
The Association of Convenience Stores, which represents thousands of small independent grocery outlets, said its members were likely to have to reduce the number of hours that their staff work, cancel investment plans or work more hours in their business themselves.The Association of Convenience Stores, which represents thousands of small independent grocery outlets, said its members were likely to have to reduce the number of hours that their staff work, cancel investment plans or work more hours in their business themselves.
James Lowman, the chief executive, said: “The introduction of a compulsory living wage will have a devastating impact on thousands of convenience stores ... to introduce this undermines the independent Low Pay Commission and is a reckless way to impose a massive burden on small businesses.”James Lowman, the chief executive, said: “The introduction of a compulsory living wage will have a devastating impact on thousands of convenience stores ... to introduce this undermines the independent Low Pay Commission and is a reckless way to impose a massive burden on small businesses.”
The minimum wage rise is a further blow for small businesses which also face new plans to enable individual towns and cities to loosen Sunday trading regulation to allow big stores to open for longer.The minimum wage rise is a further blow for small businesses which also face new plans to enable individual towns and cities to loosen Sunday trading regulation to allow big stores to open for longer.
Michael Weedon, deputy chief executive of the British Independent Retailers Association, said the reduction in corporation tax, also announced in the budget, would not help the majority of small businesses because most didn’t make enough profit to pay it. He said stores faced having to “either cut hours, or jobs, or both”.Michael Weedon, deputy chief executive of the British Independent Retailers Association, said the reduction in corporation tax, also announced in the budget, would not help the majority of small businesses because most didn’t make enough profit to pay it. He said stores faced having to “either cut hours, or jobs, or both”.
The British Retail Consortium, which represents the majority of the UK’s largest retailers, said its members paid an average £7.30 an hour already.The British Retail Consortium, which represents the majority of the UK’s largest retailers, said its members paid an average £7.30 an hour already.
However, paying the national living wage will increase costs for businesses. A senior executive at one large retailer said that every penny on wages would slice £2m off his firm’s bottom line.However, paying the national living wage will increase costs for businesses. A senior executive at one large retailer said that every penny on wages would slice £2m off his firm’s bottom line.
Bruno Monteyne, a retail analyst at research firm Bernstein, said: “Retailers are not magic machines that eat up inflation. Ultimately the consumer will pay for the increase in wages.”Bruno Monteyne, a retail analyst at research firm Bernstein, said: “Retailers are not magic machines that eat up inflation. Ultimately the consumer will pay for the increase in wages.”
He added that the wage rise would be a new boost to the discount grocers, which employ relatively few staff in relation to the amount of goods they sell.He added that the wage rise would be a new boost to the discount grocers, which employ relatively few staff in relation to the amount of goods they sell.
However, the pay increases are a victory for campaigners who have been challenging big businesses including Tesco, Sainsbury’s, Marks & Spencer, Next and Morrisons at their annual shareholder meetings over low wages.However, the pay increases are a victory for campaigners who have been challenging big businesses including Tesco, Sainsbury’s, Marks & Spencer, Next and Morrisons at their annual shareholder meetings over low wages.
Last month, Tesco boss Dave Lewis told campaigners that the retailer was in detailed talks with the trade union Usdaw about restructuring pay packages to increase basic salary. But he insisted the total amount available for workers could not be increased this year.Last month, Tesco boss Dave Lewis told campaigners that the retailer was in detailed talks with the trade union Usdaw about restructuring pay packages to increase basic salary. But he insisted the total amount available for workers could not be increased this year.
On Wednesday , Mike Coupe, the chief executive of Sainsbury’s, said he could not commit to paying the living wage as calculated by the independent Living Wage Foundation – £9.15 in London and an average £7.85 across the rest of the UK – within the next year.On Wednesday , Mike Coupe, the chief executive of Sainsbury’s, said he could not commit to paying the living wage as calculated by the independent Living Wage Foundation – £9.15 in London and an average £7.85 across the rest of the UK – within the next year.
Related: Taking the measure of the ‘national living wage’ | Letters
He explained one way of moving closer to paying the living wage would be to cut back on staff benefits such as a discount card or annual bonus. But he said more than 90% of staff would opt to keep their discount card rather than a rise in pay. “If we take away benefits to improve the base rate I don’t think that would be popular,” he told campaigners.He explained one way of moving closer to paying the living wage would be to cut back on staff benefits such as a discount card or annual bonus. But he said more than 90% of staff would opt to keep their discount card rather than a rise in pay. “If we take away benefits to improve the base rate I don’t think that would be popular,” he told campaigners.
However, the boss of another major retailer pointed out that most employers campaigned against the original minimum wage, introduced in 1999, insisting it would be disastrous. Those warnings proved unfounded.However, the boss of another major retailer pointed out that most employers campaigned against the original minimum wage, introduced in 1999, insisting it would be disastrous. Those warnings proved unfounded.
He said: “Making sure hard-working staff are getting paid well is never a bad thing. They are also customers and many of our other customers might see their pay rise. On balance it will be OK.”He said: “Making sure hard-working staff are getting paid well is never a bad thing. They are also customers and many of our other customers might see their pay rise. On balance it will be OK.”