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

  • Supermarkets could shutter stores and hire fewer over-25s
  • Moody’s says grocers may “rethink their strategy” of increasing in-store staff
  • It predicts profits at Tesco and Morrisons could slump by up to 10% in 2020

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% 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.

Tesco support

Tesco spoke out in support of the living wage last month. A spokesman said: “At Tesco, we know it is important to reward colleagues well, and that’s why we pay one of the highest hourly rates in retail.

“But we firmly believe in offering colleagues a total reward package and our benefits include a 10% colleague discount, shares scheme and pension, which we know they really value.

“That said, in line with our approach of offering sector-leading pay and a generous benefit package to all colleagues, we are supportive of the introduction of the national living wage.”

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