900,000 retail jobs could be lost by 2025, says BRC
The retail industry could lose 900,000 jobs by 2025, according to the latest report from the British Retail Consortium.
The Retail 2020: Fewer but Better Jobs report from the BRC predicted this would be driven by continuing non-food price deflation, an accelerated rate of store closures and productivity improvements, as technology will reduce the roles needed in the future.
BRC chief executive Helen Dickinson (pictured), said: “We expect the years ahead will see accelerating change. Retailers will develop better propositions and compete harder across an increasing range of business models from modern, multichannel formats through to discounters and online businesses. This report is the first of three the BRC will publish. It sets out how we expect the retail workplace landscape to change. In the third we will describe how the industry plans to tackled these challenges and opportunities.”
The number of people employed in retail hit its highest level in 2008 at 3.2 million. Since then, numbers have been declining to a recorded 3m in 2014.
The decline in retail employment has gone hand in hand with a decline in pay levels, the BRC said. In the past few years, around 57 per cent of employees in retail were in low pay, compared with about a third in the 1990s. The BRC said this could be attributed to costs having increased by 33.8 per cent between 2004 and 2014, while consumer spending rose by only two per cent.
The BRC also pointed out that profitability had fallen from six to eight per cent pre-2007 to three to five per cent today.
The report highlighted the major factors that could sew the seeds of retail decline as the National Living Wage (NLW), the Government’s proposed apprenticeship levy and business rates. It estimated these would cost the retail sector an additional £14 billion by 2020, which equates to around 20 per cent of industry profitability.
The NLW is estimated to cost retailers between £1bn to £3bn annually, more than assumptions for wage growth. In areas where economic growth is weakest, the rate of store closures is expected to increase as a result, with Wales (29 per cent), the North (26 per cent) and the Midlands (26 per cent) forecast to experience the highest levels by 2018.
The rate of store closures is likely to increase, with six out of 10 of retail leases due for renewal in the next five years. An increase in store closure rates from the current two or three per cent represents the closure of 74,000 shops from 270,000 today, equalling around 440,000 job losses.
The number of independent retailers, which account for 65 per cent of outlets nationally, has already gone into decline for the first time since 2012. British Independent Retailers Association (Bira) and Local Data Company figures show that the number of closures outstripped new openings in the first half of 2015.
Store closures and unemployment are also being driven by business taxation, as business rates (42 per cent) and national insurance (36 per cent) account for 75 per cent of retail industry taxes.
The BRC said that it was working with a number of retailers across the industry to explore what steps can be taken and the report listed recommendations for tacking the three key areas of business rates NLW and apprenticeships.
The BRC said the Government would be a ‘key player’ in the future and longevity of the industry. It said that the burden of taxation had become “unsustainable” and needed to be “rebalanced”. It suggested a cap for business rates, implementation of more frequent valuations, removal of indexation and the introduction of a flat rate, and the removal of the smallest properties and a review of all reliefs.
In terms of the National Living Wage, the BRC proposed a clear mandate to moderate the impact of increases and a review of the new structure, aligned timings of the NLW and National Minimum Wage and assurances that the 25-years threshold has no age discrimination implications.
And on apprenticeships, the BRC said that the Institute for Apprenticeships needed to be ready for the project launch date in 2017.
The BRC will publish two further reports – Retail 2020: What Our People Think and Retail 2020: Solutions, which will give the results of an industry-wide survey, while the final instalment will outline in detail how the industry plans to tackle these challenges.