With sales growth so difficult to come by, retailers have switched their attention to the cost side of the equation in recent months. There are a lot of things within your control; energy costs, contractor costs and wastage can all be reduced by giving them greater attention, while wage costs can be at least controlled through management discipline.
But not everyone is helping. Despite numerous warnings, from retailers, trade associations and even ministers, the government has rubber stamped an increase in the National Minimum Wage. I’m not against hard-working shop staff getting more, and I’m sure that retailers would agree, but the timing of the rise is bewilderingly bad.
Any increase in the basic rate is barely affordable by the industry and puts pressure on retailers to increase rates across all the pay grades. After all, nobody wants to be known as an minimum wage employer.
And the macroeconomic argument is flimsy, too, as an increase in NMW doesn’t necessarily mean an increase in net disposable income for the country as a whole if working hours are cut to compensate.
Furthermore, just as the increase in NMW is announced, business rates are due, and grocery trade luminaries such as Booker’s Charles Wilson and ex-Tesco chief Sir Terry Leahy are both calling for business rates to be scrapped or at least reformed. It’s a double whammy against the double whammy.
So here’s the challenge for government. If you really think small businesses are the driving force for economic growth then you need to scrap business rates, or freeze the minimum wage, or both. You can’t keep pushing them up and expect the business community to deliver a miracle.