Tesco, Asda, Sainsbury’s, Morrisons, Boots, and Marks & Spencer are among 79 retailers that have signed a joint letter warning Chancellor Rachel Reeves that her decision to increase the national living wage and employer national insurance contributions (NICs) will lead to job cuts and higher prices.
The letter sent by the British Retail Consortium (BRC) outlines that the sector is facing a £7bn hike in annual costs because of the changes that come into force in April next year. “For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale,” the letter says.
“The effect will be to increase inflation, slow pay growth, cause shop closures and reduce jobs, especially at the entry level. This will impact high streets and customers right across the country.”
The letter notes that retailers are already starting to make “difficult decisions” and “the sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty”.
The BRC estimates that retailers will face a £2.3bn bill after the implementation of the increase in employer NICs from 13.8% to 15%, as well as the reduction in the earnings threshold that they must start paying it from £9,100 to £5,000. The changes will impact retailers particularly hard because they employ large numbers of people in entry-level and part-time roles.
In addition, retailers estimate their wage costs will increase by £2.73bn from April, while a further £2bn expense will come from the implementation of Extended Producer Responsibility (EPR) fees on packaging.
The BRC’s letter calls for a discussion with the Treasury to address some of the companies’ concerns. It offered solutions, including a phased introduction of the new lower earnings threshold on national insurance (NICs) and a delay on the start of the levy on packaging.
NAM Implications:
- Patently Budget increases re national living wage…
- …and employer national insurance contributions (NICs)…
- …will lead to job cuts and higher prices.
- Fortunately, ‘this will not affect consumers’ (according to the Chancellor…)
- Hopefully, the UK will not have to await retailer annual reports for 2024 & 2025 to acknowledge what was done to retail…
