Following the UK Budget, Primark’s owner, Associated British Foods (ABF), anticipates workforce reductions due to increased automation.
- Chancellor Rachel Reeves has raised National Insurance contributions, heavily impacting retail businesses with a projected annual increase of £2.3 billion.
- Primark aims to offset costs through wider use of self-checkouts and warehouse automation, affecting staffing levels in the coming year.
- Despite a rise in revenue and profit, Primark acknowledges that cost savings alone won’t counterbalance tax and wage increases.
- ABF is hopeful that increased minimum wages may raise consumer spending, benefiting Primark’s value offerings.
Following the latest UK Budget, Primark’s parent company, ABF, outlined a strategic response to forecasted cost burdens due to tax increases. Chancellor Rachel Reeves announced a rise in National Insurance contributions for employers from 13.8% to 15%, alongside a reduction in the earnings threshold to £5,000. This policy change is expected to generate £25 billion annually, with retail accounting for a significant portion of £2.3 billion.
ABF CEO, George Weston, expressed concern over the increasing financial pressures, noting, ‘We employ about 40,000 people in the UK, so the increase in employers’ National Insurance contribution is a very big number indeed.’ As part of its cost-saving measures, Primark plans to expand self-service checkouts, currently present in approximately 100 of its 451 global stores, potentially reaching 180 by the year’s end.
Additionally, ABF is investing in warehouse automation, which is likely to reduce their UK workforce in the near future. Weston remarked, ‘I think we will be employing fewer people as a consequence of the automation in a year’s time.’ This technological shift forms part of a broader refurbishment strategy aimed at enhancing the retail experience and reducing operational costs.
Primark recently reported a 6% revenue increase to £9.4 billion, attributing this to enhanced store experiences and digital outreach. The operating profit soared by 53% to £1.1 billion, owing to lower material and freight costs, and the stabilisation of prior price hikes. Despite these gains, Weston anticipates that cost-saving initiatives alone will not offset the regulatory financial impacts.
Looking to the future, ABF is cautiously optimistic about the potential rise in consumer spending due to a 6.7% increase in the minimum wage to £12.21 per hour. ‘We hope to see the increases in minimum wage leading to the least affluent with a bit of money to spend with us,’ Weston noted, highlighting Primark’s strategic focus on serving value-conscious consumers.
ABF’s strategic investments in automation are a calculated response to fiscal challenges, balanced by hopes for increased consumer spending.
