Retailers consider impact of latest rise in wage costs

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Retailers have started to explore how they will absorb rising staff costs after the chancellor’s decision to increase the National Living Wage (NLW) to £7.83 next April.

In last week’s Budget, chancellor Phillip Hammond announced that the NLW would rise by 4.4% to £7.83 per hour for workers aged 25 and over, on the recommendation of the Low Pay Commission (LPC). He also accepted the LPC’s advice for other minimum wage rates to apply from April 2018. For youth rates, this represents the largest increase in 10 years.

Sid Ali, owner of five Nisa stores in Aberdeenshire, is worried about the effect that rising costs and increasing wages may have on retailers.

He said: “The National Living Wage is getting to the stage where, I understand what people are trying to achieve, but if you look at the economic outlook we are expected to make cut backs and grow our business in a declining market.

“The way I see it, independent retailers may have to close shops if they can’t make the cost savings on staffing. I’ve just been looking at our rotas and I’m already looking to give younger people more opportunities and recruit them for longer to give them more shelf time.

“Even though wages and the rate at which people pay tax has been changed, there has been no increase in the National Insurance threshold. This means we are encouraged to employ more staff for shorter hours to avoid paying out even more. It’s having a very bad effect on retailers in my area.”

Dean Holborn, owner of two stores in Surrey, is exploring all the options when it comes to coping with the NLW.

He said: “Like everyone else in the industry, we have to carry on as best we can. The rise in wages is going to affect our bottom line so we constantly reviewing our costs and looking at where we can reduce staffing hours.

“That may mean changing our opening hours too. If you look at our news deliveries, that we get at five or six o’clock in the morning, is it worth employing staff at that time when the market is in decline? It’s not always ideal employing younger staff, sometimes it can be counterproductive, but the money has to come from somewhere.”

Harris Aslam, owner of three Nisa stores in Scotland, said: “Staffing is our biggest overhead. The increase in NLW is having an effect on the number of new stores we can build and in what locations, as we look at more cost saving options.”

Harry Goraya, owner of Rosherville Post Office in Gravesend, Kent, added: “We now have the minimum amount of staff that we need to run the store. But there is a danger that the rate will go up again and, along with rates and product inflation, it is becoming very tough to adapt.”

The Chancellor’s announcement of a 4.4% rise in the National Living Wage comes despite gloomy forecasts for the UK economy. The Office for Budget Responsibility has lowered its real GDP forecast to average only 1.4% a year over the next five years. With inflation rising and productivity flat, average real earnings are predicted to drop, making consumers more cautious about spending.

Readers' comments (3)

  • Shopkeepers will have to put up with it.The less the Gov have to pay out to top up wages the better for public services.Stop moaning and get on with it

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  • The government is taking out more from “our pot” than putting in is the simple arithmetic here. Nobody can dispute that. The examples of half-hearted rates support and not a full review, pension contribution, minimum wage on a permanent upward trajectory well above the rate of inflation and not to mention useless legislation of little or no value heaped on the convenience sector is not helping us. The government has acknowledged that the sector is one of the largest employer in the country keeping communities together yet no overall strategy from the government.
    The idea that the savings will go to public services is equally laughable. Its bit like saying all the road tax will go towards improving our infra structure.
    Retailers cannot cut back and cross subsidise the wage bill any longer. Most of the businesses have cut to the bone and any more would then have a negative impact on shoplifting and security, never mind holiday cover, sickness etc. etc. .
    I strongly believe we have a great future in the convenience sector if only the government stops looking at “bricks & mortar” businesses as cash cows they can tap into whilst leaving online businesses and coffee houses with an unfair tax advantage. We have some of best outcome with the consolidation that is taking place now which will help us compete with the market in terms of price and quality. Hope it all works out is all I can say….

    Arjan Mehr Londis Bracknell

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  • Better for public services? Where is the evidence of that? Public services continue to be cut while central government force us into bankruptcy by continuing to legislate over the wages we pay our employees. This path is not sustainable in the present economic climate, how are we supposed to pay an almost 5% INCREASE in wages while facing a virtual negative increase in business growth? Government get your head out of the sand and stop ruining our businesses and remember we are the source of much local employment in our communities. You force us to close you lose millions of jobs! Nigel Dowdney.

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