Future of Work

One of the UK’s largest employers, the retail sector, is facing the loss of up to 900,000 jobs and the closure of thousands of shops in the next decade. A British Retail Consortium report says rising costs due to the National Living Wage and the new apprenticeship levy could speed up job cuts.

The pair are two of George Osborne’s flagship policies announced in last year’s Budget. The study says “economically fragile” parts of the UK will be hit hardest.

The National Living Wage and apprenticeship levy “both have sound intentions but both could fail on implementation”, it says.

Sir Charlie Mayfield, chairman of the British Retail Consortium (BRC) and head of the John Lewis Partnership, said that although retailers supported the introduction of higher pay, there would be an effect on employment.

The retail sector employs three million people – a number that could fall by nearly a third in less than a decade.

Sir Charlie said that many shops would also close, as increasing costs and changes in the way millions of consumers shop take hold.

Of the 270,000 shops in the UK today, up to 74,000 could shut, the BRC report claims. Nearly 30% of those closures could be in Wales and the north of England.

“People are not realising just how significantly the workplace is changing and I think that is dangerous,” he said. “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 BRC report says that the effects of the National Living Wage on employment “have been under-estimated”. In April, the National Living Wage will come into force at a rate of £7.20 an hour for the over-25s, replacing the present minimum wage of £6.70 per hour.

George Osborne announced in the post-election Budget last year that it would then increase to £9 an hour by 2020.

The BRC estimates a cost to the industry of up to £3bn per annum. “With the introduction of the National Living Wage, labour costs are now set to rise,” the BRC report says.

Low pay

Supermarket critics say that the sector has relied for too long on low wages, with the BRC report revealing that the percentage of people on low pay (defined as 1.2 times the minimum wage) in the retail sector has nearly doubled since 1990 to over 60%.

For all employees it has stayed stable at under 20%. Sir Charlie told the BBC that although the number of jobs would fall dramatically, the jobs that are left would be more productive and pay would be higher.

Services to customers were also likely to improve and prices fall. “I do very much believe that persistent low pay needs to be tackled, which is why we’re talking about ‘fewer but better’ jobs,” he said.

“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.”

Although not calling for a full review, Sir Charlie said that impact of the National Living Wage on employment would have to be looked at “carefully and objectively to see how things are working out”.

The BRC report says retailers are facing a heavy tax burden and that business rates have yet to be reformed. Sir Charlie said there needed to be a fundamental review of retail taxes.

Stores such as John Lewis pay far higher levels of tax in the UK than companies like Amazon, although Sir Charlie was careful to avoid what his colleague, Andy Street, the chief executive of John Lewis, described as the “Amazon tax problem”.

The Treasury played down fears of substantial retail job losses. “The government is making sure workers in Britain get a pay rise by introducing the National Living Wage from April this year,” a spokesman said.

“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 of Budget Responsibility expects employment to rise by a further 1.1 million by 2020.”

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