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Retailers could close stores and hire fewer over-25s because of living wage

Supermarkets could shut stores and avoid employing workers over the age of 25 when the national living wage becomes law

According to Retail Week, credit rating agency Moody’s has warned that the compulsory wage of £7.20 per hour next year and more than £9 an hour by 2020, introduced by Chancellor George Osborne in the summer Budget, would dent profits of the grocers.

Although Moody’s said next year’s rate would “not be overly taxing” for retailers, it added the £9 per hour rate would have an impact.

Moody’s forecasts that Tesco’s profits would be 7% lower in 2017 and Morrisons should be braced for a 10 per cent drop if it does not take action to cover the cost of higher wages.

It comes after the Office for Budget Responsibility estimated that the national living wage will lead to 60,000 job losses.

The big four grocers alone employ 750,000 staff between them and Moody’s suggested they could respond by closing stores, employing fewer staff in existing stores and hiring more people under the age of 25, who are not eligible to receive the new living wage under Osborne’s plans.

Tesco and Morrisons are among the grocers that have slashed head office jobs in recent months, but both have ploughed cash into increasing the numbers of customer-facing staff in stores.

Sven Reinke, vice-president and senior analyst at Moody’s, said the living wage could force them to “rethink their strategy”, The Guardian reported.

 

 

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