Smaller retailers are groaning under the burden of the latest above-inflation rise to the minimum wage, says Ronan Hegarty
Small and medium-sized retailers and wholesalers are expecting to be hardest hit by this week’s hike to the national minimum wage. Independents believe that the rise to £5.05 an hour from £4.85 for adults and to £4.25 from £4.10 for 18 to 21-year-olds is a move that will further jeopardise their ability to compete with the multiples.
This week The Grocer held its annual luncheon for the Top 50 independent retailers and Big 30 wholesalers and Saturday’s rise was certainly one of the hottest topics, coming as it does in the wake of rising fuel prices and utility bills and the burden of red tape
John Cox, MD of south east-based convenience chain Rusts, is just one retailer facing a hefty rise in his overheads. “The problem is not just those employees earning the minimum wage. The rest of the staff will expect to see a raise in their pay pro rata. With 12 stores open for more than 100 hours a week, the cost of employing a minimum of two or three people at all times will work out at around £25,000 more a year.”
He claims the picture is even more worrying considering the Low Pay Commission’s recommendation there should be a further rise to £5.35 an hour in October next year. “It is hard to understand what the government is trying to achieve. Rather than setting a mark which employers can’t fall below, it seems they are trying to create an average national wage,” says Cox.
Kevin Hawkins, director general of the British Retail Consortium, has called for future increases to be considered in light of economic conditions at the time, rather than suggestions being made now for what should happen in a year’s time. He is also irritated by the scale of the increases. “Above-inflation increases to the minimum wage are
proving very difficult for both larger and smaller retailers to absorb, especially in today’s tough trading conditions.”
Kevin Gunter, a director of frozen food retailer Frozen Value, also stresses the disproportionate impact on smaller retailers. Even though the multiples are bigger employers, they have a much better capacity to absorb the extra costs through stronger buying power, wider margins and an increased ability to rationalise staffing levels - not to mention greater profitability.
“At the moment we are in a position whereby almost all of our costs are dictated by legislation, leaving us no room to manoeuvre. We can’t pass these costs on to customers, or we would lose ground to the big supermarkets.”
Therefore, smaller retailers and wholesalers face these costs having to come off the bottom line. And there is little sympathy forthcoming from the government or the unions. Speaking at the BRC annual dinner, Alun Michael, minister for industry and the regions, told retailers that the minimum wage had helped make one million low-paid workers part of their purchasing economy.
Usdaw general secretary John Hannett, meanwhile, says: “Businesses large and small need to have strategies for dealing with increases in the minimum wage as well as balancing other costs. Most independents have proved adept at surviving but we don’t believe increases in the minimum wage are a central factor in businesses closing.
“When we looked at bankruptcies, we didn’t find one example where the minimum wage was cited as a reason for an independent closing.”
In the light of this, one wholesaler paints a particularly gloomy picture for the longer term: “What was an acceptable safety net has become an ideological test of strength between business and government.”
Small and medium-sized retailers and wholesalers are expecting to be hardest hit by this week’s hike to the national minimum wage. Independents believe that the rise to £5.05 an hour from £4.85 for adults and to £4.25 from £4.10 for 18 to 21-year-olds is a move that will further jeopardise their ability to compete with the multiples.
This week The Grocer held its annual luncheon for the Top 50 independent retailers and Big 30 wholesalers and Saturday’s rise was certainly one of the hottest topics, coming as it does in the wake of rising fuel prices and utility bills and the burden of red tape
John Cox, MD of south east-based convenience chain Rusts, is just one retailer facing a hefty rise in his overheads. “The problem is not just those employees earning the minimum wage. The rest of the staff will expect to see a raise in their pay pro rata. With 12 stores open for more than 100 hours a week, the cost of employing a minimum of two or three people at all times will work out at around £25,000 more a year.”
He claims the picture is even more worrying considering the Low Pay Commission’s recommendation there should be a further rise to £5.35 an hour in October next year. “It is hard to understand what the government is trying to achieve. Rather than setting a mark which employers can’t fall below, it seems they are trying to create an average national wage,” says Cox.
Kevin Hawkins, director general of the British Retail Consortium, has called for future increases to be considered in light of economic conditions at the time, rather than suggestions being made now for what should happen in a year’s time. He is also irritated by the scale of the increases. “Above-inflation increases to the minimum wage are
proving very difficult for both larger and smaller retailers to absorb, especially in today’s tough trading conditions.”
Kevin Gunter, a director of frozen food retailer Frozen Value, also stresses the disproportionate impact on smaller retailers. Even though the multiples are bigger employers, they have a much better capacity to absorb the extra costs through stronger buying power, wider margins and an increased ability to rationalise staffing levels - not to mention greater profitability.
“At the moment we are in a position whereby almost all of our costs are dictated by legislation, leaving us no room to manoeuvre. We can’t pass these costs on to customers, or we would lose ground to the big supermarkets.”
Therefore, smaller retailers and wholesalers face these costs having to come off the bottom line. And there is little sympathy forthcoming from the government or the unions. Speaking at the BRC annual dinner, Alun Michael, minister for industry and the regions, told retailers that the minimum wage had helped make one million low-paid workers part of their purchasing economy.
Usdaw general secretary John Hannett, meanwhile, says: “Businesses large and small need to have strategies for dealing with increases in the minimum wage as well as balancing other costs. Most independents have proved adept at surviving but we don’t believe increases in the minimum wage are a central factor in businesses closing.
“When we looked at bankruptcies, we didn’t find one example where the minimum wage was cited as a reason for an independent closing.”
In the light of this, one wholesaler paints a particularly gloomy picture for the longer term: “What was an acceptable safety net has become an ideological test of strength between business and government.”
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