Retailers slash 84,000 jobs amid storm of rising costs and fierce competition

Helen Cahill
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Technology has advanced in the retail sector, threatening thousands of jobs (Source: Getty)

Retailer shed an estimated 84,000 jobs in the final quarter of 2016 as the industry heads for what could be a “more profound” shake-out than it experienced after the financial crisis.

New figures from the British Retail Consortium (BRC) show the number of jobs in the sector fell three per cent year-on-year in the final quarter of last year. Food retailers drove the decline in employment.

“Against the backdrop of cost pressures, fierce competition between retailers, evolving customer needs, and the lightning expansion of digital technology, many retailers are likely to continue re-examining staffing levels to continue adapting,” said BRC chief exec Helen Dickinson.

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Analysts point towards an impending jump in business rates in April and the escalating national living wage as other factors putting the squeeze on retailers.

With approximately 2.8m people employed in the sector, according to consultancy Retail Economics, a three per cent fall equates to job losses totalling 84,000.

The consultancy’s Richard Lim said the “lion’s share” of retailers’ cost inflation has come from increased labour costs, notably the national living wage. Operational costs for retailers, including labour costs, increased 4.9 per cent in the fourth quarter of 2016 as compared to the same quarter a year before.

Retailers are likely to cut back on hours, close stores, and increase prices in a bid to offset the national living wage.

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In April, the national living wage will increase again from £7.20 to £7.50 an hour, a rise of 4.2 per cent just as business rates rise and rising inflation is likely to bite.

“Retail as a whole is not a minimum wage paying industry, but the issue here is that as the minimum wage increases, retailers will want to keep the differential with the lowest-paid workers and higher-paid ones,” Lim said.

“There is a ripple effect across the retail industry.”

The hike comes at the same time as business rates increase for many retailers. The rates have been re-evaluated and will increase markedly for businesses in London and the south east from April.

The sum effect will lead to a significant shake-out in the retail industry, according to independent retail analyst Richard Hyman.

“This is the beginning of the impact of headwinds that will cause a significant shake-out – more significant and more profound than the shake-out after the financial crisis,” Hyman said. “That shake-out wasn’t much of a shake-out at all. Now, the market is over-supplied, there are too many players. There will be a reset between supply and demand.”

“The immediate thing retailers are trying to get their heads round is how this [business rates] re-evaluation is going to play out,” said Rachel Lund, head of insight and analytics at the BRC.

“It has put a spanner in the works, and some retailers have got considerable cost pressures from that.”

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