Out-Law News | 02 Mar 2016 | 10:30 am | 3 min. read
The industry body said that government policy with "sound intentions", including the impact of a higher national minimum wage and the 'apprenticeship levy' which will be payable by the largest UK employers, would increase labour costs by as much as £3 billion a year and increase the pace of change.
The impact of this would be particularly striking in "areas that are already economically fragile" including Wales and the north of England, where are many as 30% of the 74,000 shop closures projected nationwide could happen. The BRC called on the government to "re-balance the burden of taxation" on physical retail through reforming business rates, and to give the Low Pay Commission stronger oversight of the planned National Living Wage (NLW).
"Individual retailers will find their own paths to 2020 and beyond but, from an industry perspective, we hope to see technology and competition resulting in better experiences for the customer and better jobs for those working in retail," said Helen Dickinson, chief executive of the BRC.
"From a government perspective the more significant insights in this report lie in where and how these changes may happen and the differential impact they are likely to have on people and places across the country and we would like to work with government to manage the impact of the changes on the most vulnerable," she said.
Businessman Theo Paphitis, chair of Ryman Stationery and Robert Dyas, said that the report showed that "without a major re-think by the government around the business rates system and the apprenticeship levy, together with careful consideration of the NLW, the trading conditions for retail are set to worsen significantly".
"The most vulnerable people and places will be impacted and we are keen to play our part in implementing these policies, but the government will need to work hard to mitigate their impact," he said.
Retail is the largest private sector employer in the UK, with three million people currently working in retail and wholesale businesses. This number was already falling and could drop as low as 2.1 million by 2025, predominantly due to "ongoing structural change" as a result of the growth of e-commerce. However, the pace of change would be "accelerated" by the increasing cost of labour and retailers increasing their investment in digital at the expense of physical retail, according to the BRC's report.
The shift to digital would create new opportunities, while the BRC predicted that the remaining physical retail jobs would be "more productive and higher earning", with a wide variety of roles and better opportunities for training. However, the impact of the job losses would be more severe in parts of the country where wages were already low, while some of the people affected by changing roles would be "those who may find it hardest to transition into new jobs that are created", the BRC said in its report.
"The [NLW] is planned to reach 60% of median earnings nationally by 2020," the BRC said. "This will have little or no impact in affluent areas, especially London and south-east, where starting rates are often at or above this level already. However, £9 per hour by 2020 is forecast to be equivalent to at least 70% of median earnings in many other parts of the country, and will force employers to consider if they can afford those roles. This will be most acute in regions where economic growth is weakest."
The percentage of retail employees on 'low pay', defined as less than 1.2 times the minimum wage, has risen steadily since 1990 to around 57%, compared to around 21% of all UK employees. A higher national minimum wage (NMW) of £7.20 per hour, dubbed the 'national living wage', will be introduced next month for all employees aged 25 or over, and the government's intention is for this to rise to £9 per hour by 2020. The BRC said that although "the rising incidence of low pay within retail suggests that pay does need to be addressed", the government had "underestimated" the impact of the policy on employment.
The need to reform business rates, which now make up 42% of the taxes paid by retailers, was now "urgent", the BRC said.
"Retail is committed to playing its part but the balance of business taxation has become increasingly weighted against people and property intensive businesses, which is contributing to store closures and unemployment," it said in its report.
The government should also "phase in" the apprenticeship levy, which will be charged at 0.5% of the wage bills of the largest businesses from 2017; and provide further clarity over how the funds raised will be allocated, the BRC said.