One-third of UK retail jobs to vanish by 2025

Britain’s retailers predict that almost 1m jobs in the sector — a third of today’s total — will disappear by 2025 as technology and the rising minimum wage reshape the industry.

Retailers currently employ one in six British workers — about 3m people — and the sector accounts for a tenth of the economy.

But the British Retail Consortium, the industry's trade body, believes that higher wage costs coupled with improved productivity will result in "fewer but better jobs" in the near future.

The BRC said up to 900,000 retail jobs would disappear within a decade and warned that small businesses and poorer areas would find it hard to adapt.

“What matters is who and where will be affected most by all this change,” said Sir Charlie Mayfield, chairman of the BRC and John Lewis. “These are the valleys to cross and the path through them needs to be charted with care.”

Leading retailers approached by the FT, collectively employing a quarter of the sector’s workers, declined to say whether their own plans were in line with the BRC’s striking forecast.

But Sir Ian Cheshire, chairman of Debenhams, said there was "no doubt" the industry was changing fast and "there will be fewer retail jobs in the future".

Dave Lewis, Tesco chief executive, said: "The combination of price deflation, business rate rises and growing labour costs is putting increasing pressure on a highly competitive sector which is already going through a time of great change."

Industry analysts said that, while fewer people would be employed in traditional stores, the shift to online shopping would create jobs in call centres, technology operations and delivery networks.

The BRC’s warning comes a month before the introduction of the “national living wage” (NLW) — the government’s name for a new £7.20-an-hour minimum wage for those aged 25 and over that will reach £9-an-hour by 2020, one of the highest in the developed world.

The retail association said the projected rise — while not the only factor driving its job projections — would increase labour costs and accelerate the industry’s shift towards automation and online retail.

“The retail industry is supportive in principle of the NLW but the effects on employment have been underestimated,” the report said.

Some US retailers have already moved to paying higher wages, gambling that customers will reward shops where higher-calibre employees offer better service.

Walmart this month started paying its most junior US staff $10 an hour, nearly 40 per cent more than the federal minimum wage of $7.25. “Our customers and associates are noticing a difference,” said Judith McKenna, chief operating officer of the US business.

In the UK, the official estimate is that the increase in the minimum wage will only cost about 60,000 jobs by 2020. But economists are split over how it will affect Britain’s labour market, where employment is at record highs but productivity and pay growth are weak.

George Osborne, the chancellor, believes the policy will jolt Britain out of its "low-pay, low-productivity trap" because employers will be motivated to improve training for their low-skilled staff to make them "worth" the higher pay packet.

What matters is who and where will be affected most by all this change. These are the valleys to cross and the path through them needs to be charted with care

But some economists fear that companies will respond to higher wage costs by making do with fewer workers. This would also raise overall productivity, but at the cost of higher unemployment.

The BRC called on the government to give the Low Pay Commission, the body charged with monitoring the effects of the NLW policy, a stronger mandate to make recommendations on the pace of increases, taking into account of the impact on different regions and sectors. It also said business rates should be reformed and the "apprenticeship levy" — a 0.5 per cent tax on payroll to fund apprenticeships — should be phased in.

A Treasury spokesperson said, “We are already seeing record employment rates and more people in employment than ever before. And taking into account the national living wage the independent Office of Budget Responsibility expects employment to rise by a further 1.1m by 2020.”

(Copyright The Financial Times Limited 2016)