The retail sector represents one of the biggest industries in the United Kingdom. However, it is now reported to be faced with the possibility of shrinking its workforce by an estimated 900,000 jobs. This warning has been issued by the BRC (The British Retail Consortium).
The British Retail Consortium represents retail companies up and down the country has said that the increasing costs due to the new apprentice levy and the “national living wage” is likely to increase the amount of jobs that get axed.
The BRC commented on the new policies, both of which were delivered in George Osborne’s autumn statement, saying: “Both have sound intentions but could fail on implementation. Together these effects could mean there are as many as 900,000 fewer jobs in retail by 2025 but those that remain will be more productive and higher earning.”
The prediction has been made only the day after Morrisons announcement that it will be partnering up with Amazon to begin selling food in the United Kingdom. The new Amazon Pantry section of the company is expected to have similar success in groceries as it did in music and home entertainment.
According to the British Retail Consortium, around 74,000 of the United Kingdom’s shops could closedown. The report went on to say that around 30% of these shops would be likely to be located in Wales or the north of England.
Following the economic crisis of 2008, many retailers found it difficult to recover and many high streets in Britain still haven’t done so. MFI, Zavvi and Woolworths were just some of the big names shops to have disappeared since then.
The report goes on to say:
“Areas that are already economically fragile are likely to see the greatest impact of store closures and some of the people affected by changing roles will be those who may find it hardest to transition into new jobs that are created.”
As of April 2016, over-25s will have to be paid £7.20 an hour- as the new national living wage comes into effect. This represents an increase of 70 pence per hour; it is an increase that the British Retail Consortium estimates will cost the sector as much as £3bn per year.
The BRC also carried out a survey amongst “low-paid employees” (defined as people who make less than one-fifth above the minimum wage) and reported that 70% of them were women with an average age of 35 years old.
The chairman of the BRC and head of John Lewis said that whilst the retailers were in favour of higher wages, it would nonetheless have an impact upon employment.
“People are not realising just how significantly the workplace is changing and I think that is dangerous. It means that people assume that somehow things are going to carry on as they are, when that’s unlikely. Some of the places that will be affected will be some of the most economically fragile.”
The report from the British Retail Consortium also revealed that the number of people who are now working in the retail sector on low pay has almost doubled in the last 25 years- now sitting at a ratio of 60%.
Mayfield went on to say:
“I do very much believe that persistent low pay needs to be tackled, which is why we’re talking about ‘fewer but better’ jobs,”
“What the national living wage does is that it increases the pace at which wages will rise – and by the way that’s not a bad thing, it’s in many ways a very good thing – but it will also probably accelerate some of the changes within the workforce and the responses that retailers make in order to mitigate some of the rising cost pressure that they’re seeing.”
He also said that the effect that the new national living wage was going to have on employment was going to have to be very carefully scrutinised.
Sir Charlie continued to say that the government should be rebalancing the different levels of taxation that companies on the high street and companies online have to pay. He argues that this gives companies like Amazon an unfair advantage.
“Headline reductions in corporation tax may encourage some businesses to move their tax domicile to the UK, but they are effectively being paid for by businesses who are large users of property, large employers and significant users of fuel,” the report said. “The burden of taxation on the retail industry has become unsustainable and must be rebalanced.”
Speaking to the BBC a Treasury spokesman said:
“The government is making sure workers in Britain get a pay rise by introducing the national living Wage from April this year. We are already seeing record employment rates and more people in employment than ever before.
“And taking into account the national living wage, the independent Office for Budget Responsibility expects employment to rise by a further 1.1m by 2020.”
Sir Charlie went on to describe the national minimum wage as a “blunt instrument” that whilst aiming in the right direction doesn’t quite address the nuanced nature of the retail sector across the country as a whole.
“What the living wage does is increase the pace at which wages will rise and that’s not a bad thing, it’s in many ways a very good thing. But it will also probably accelerate some of the changes within the workforce and the responses that retailers make in order to mitigate some of the rising cost pressure that they’re seeing.”
“The ambition is that the national living wage should be equivalent to 60% of the median earnings in the UK nationally by 2020. There is nothing particularly wrong with that as an aspiration. The difficulty is that median earnings in London are very, very different to median earnings in other parts of the country. Therefore the chance of that having a bigger impact on employment in areas that are economically weaker is greater. That is more concerning.”
He went on to discuss the prospect of more shop closures and the effect that that will be likely to have on the high street.
“One of the important findings in the report is that the rate of closure of retail space will be very uneven over the country. Where you’ve got parts of the country which are economically vibrant, growing, with strong demand, there will clearly be less closure. It’s areas which are economically fragile, with less demand, which are where you’re likely to see a greater amount of shops closing.”
He continued by discussing the number of retailers that have employees on low pay and said that he didn’t think that the industry had a “low-pay problem”.
“I don’t think it’s a problem with low pay as such, it’s just the nature of jobs that are done in retail have always meant that the sector has had a greater proportion of people on lower pay than in some other sectors in the economy as a whole. That has risen as a proportion and its substantially because the costs on retail have risen faster than the demand in the economy as a whole, and it’s also because technology is changing the nature of those jobs. All those effects are playing their part.”