Retail Environment
New ‘living wage’ will cost almost £4 bn per year to retail sector in next four years
The new national ‘living wage’ to be introduced in April will cost retailers a staggering £3.26bn per year in extra pay, national insurance and pensions, according to a new study by the influential Centre For Retail Research (CRR).
The hard-hitting report also estimates that it will push inflation up by 1.1 per cent, per year and hit jobs and hours in the sector and could trigger the closure of up to 14,000 stores between now and 2020.
According to Professor Joshua Bamfield, the pay rise for the over 25s would amount to a 38 per cent increase at a time when public sector workers are being capped at between 1 and 1.5 per cent.
However, Professor Bamfield suggests that of the three million retail workers in the UK, many over 25 are already earning over the existing minimum wage while many employed in the supermarket and fashion sectors are under the qualifying age.
The rationale for the living wage is to reduce tax credits, but Professor Bamfield suggests that it will not be significant enough to insulate low income households from the loss of such benefits.
According to the Office for Budget Responsibility (OBR), 60,000 jobs across all sectors could be lost as a result of the living wage introduction.
The CRR predicts that retailers will have no other choice but to try and pass the rise in wages on to consumers in terms of higher prices and additional charges for home delivery services, which could make online shopping less attractive.
The chancellors gesture of cutting corporation tax from 20 per cent to 19 per cent for retailers will also have little impact on low margin retailers squeezed by price wars with competitors.
The conclusions therefore could be dramatic for the retail sector and the intended beneficiaries of the living wage could end up being worse off, according to the report.
