Skip to content
Search
AI Powered
Latest Stories

Exclusive: Minimum wage increase having ‘detrimental’ impact on c-stores

Exclusive: Minimum wage increase having ‘detrimental’ impact on c-stores
iStock image
Getty Images

Increase in National Minimum Wages is having a “detrimental effect” and “negative impact on profitability” of convenience stores at a time when they are already reeling under increased cost of food, fuel and energy.

As per the new directions, National Living Wage for over-23 is now £8.91 to £9.50 an hour. This increase in the minimum wages to UK workers came into force on April 1, benefiting about two million people.


The increase in minimum wage tends to touch upon the lives of store workers as well. As per Statista, convenience stores provide around 392,000 jobs as of 2021.

The new rates, which were announced in October, came just in time as household budgets were facing mounting pressure because of the soaring cost of living.

However, the increase has put extra pressure on convenience store owners who were already facing a reduction in footfall as well as basket size and average spend due to constantly increasing prices and spiking energy bills.

London retailer Pete Patel is resorting to working smartly and cutting down as many extra hours as possible. He has five convenience stores, all under Costcutter fascia, in addition to a Bargain Booze outlet.

“The increase in minimum wage has obviously had a negative effect on my profitability. We are also now looking at how we can get the staff to work smarter, so we don't need as many hours,” Patel told Asian Trader.

Image e1643283325631 Shahid Razzaq

South Lanarkshire-based retailer Mo Razzaq echoed similar sentiment when he revealed how this recent increase in minimum wage has only added to a slew of expense pressure.

“We already had inflation. We also were facing an increase in electric and gas bills. Not to forget a massive increase in petrol and diesel prices. Now this increase in minimum wages is having a detrimental effect on our business,” Razzaq told Asian Trader.

Inflating Yet Shrinking

According to the Lumina Intelligence UK Convenience Market Report 2021, the sector grew by 6.3 percent in 2020, pushing its value up to £43.1 billion.

However, the cost of living crisis is affecting stores as well. Shoppers are choosing discounters over local stores to seek cheapest possible prices and discounts.

The cost of food and fuel in the country has risen sharply, with inflation reaching 9 percent in April — the highest in 40 years. The same month, annual energy bills jumped by 54 percent, amounting to an extra 700 pounds a year on average for each household. Another energy price hike is expected in October, as Russia’s war in Ukraine and rebounding demand after the pandemic push oil and natural gas prices higher.

The prospects for the coming months remain gloomy. Experts have predicted that price rise, exacerbated by the Russia-Ukraine conflict, will have long lasting effects, spilling to next year as well.

A recent report from the International Monetary Fund said the U.K. is expected to be the slowest-growing economy out of the Group of Seven leading democracies in 2023 as the war sets back the global economic recovery from the pandemic.

iStock 1289416240 1 iStock image

Before the minimum wage was introduced, there were concerns that it would cost jobs, because business owners would compensate for their higher wage expenses by hiring fewer people. Some argued that increases in minimum wage put pressure on businesses and will increase unemployment as businesses seek to protect their bottom line.

This year, the concern is seemingly turning out to be partly true. Although there is no data or evidence to claim that there is an overall loss of jobs linked to the minimum wage, the latest increase in the minimum limit is having its own subtle ripple effects.

Like in cases of small and medium convenience stores, owners are refraining to hire more staff even if there is a requirement. Retailers, to cut down expenses and maintain the profitability of their businesses, are now making extra effort to manage with the present staff and making sure not to expand their workforce.

Patel, who has stores in Brockley, Derbyshire and Brentwood, Essex, informed how he is trying to keep minimum-possible staff though he also does not want to reduce the strength further knowing it will damage the whole system.

“Since we are trying to keep minimum staff, we are running on a tight shift. I don't want to reduce staff even if I want (to cut down the cost) because then that will just reduce the customer service level and other stuff,” he said.

“Since the overall cost is shooting up, we have to be a lot more careful, especially during people's holidays and other stuff. All we are trying is not to put extra staff as it will put extreme pressure and leave me robbed of profit margin,” he said.

The average salary for grocery store jobs is £31,787, with highest pay seen in Central London and lowest in Stoke-on-Trent.

Traditionally, the retail industry has its own way of responding to wage increases, mainly among which are improving workers’ efficiency, investment in technology to automate low-skilled jobs and hiring more under 23s.

This year’s 6.6 percent increase is hurting the retailers more than before.

Like Patel, retailer Razzaq too is rationing strictly on working hours so as to cut down as much extra expense as possible.

“Right now, I am concentrating on managing my workforce efficiently and trying to cut down extra hours,” he said.

Razzaq too claimed that despite struggling with this recent increase in staff wages, he has still not cut down his work force.

He also informed that apart from this aspect, he is working on cutting costs on everything else as well to “tighten the business as much as possible without having a service setback on customers”.

A recent survey by NerdWallet claims that 73 percent consider issues with staff retention a threat to their organisation. 70 percent of small and medium business leaders stated that difficulties in recruiting new employees pose a major threat to their business. More than one in four (26 percent) consider recruitment issues to pose a major threat to their business, says the report.

Contrarily, both Patel and Razzaq denied facing any workforce availability issue at the moment. Their core issue remains to cut down expenses and be more efficient when it comes to maximum utilisation of their resources.

Although present in every segment and industry, it is retail, care and hospitality sectors that account for a large number of minimum wage jobs. The new guidance is supposed to cover everyone including part-time workers, casual, agency workers, piecemeal workers, apprentices, trainees, workers on probation, disabled workers, agricultural workers, foreign workers, seafarers or offshore workers.

Higher Prices, Lower Profits

Increase in wages may be impacting small and medium businesses in these decades-high inflationary times but the move seems to have done its bit in uplifting low-paid workers as well.

According to a new analysis from the Resolution Foundation published last week, the share of low-paid workers in the UK has hit a record low and is on track to be "eliminated" by 2024.

The report found that the introduction and elevation of the minimum wage has helped to reduce low pay this year to a joint record low of 13 percent in 2021.

However, the number of low-earning self-employed has gone up, says the report.

Separate data from the ONS showed average wages continued to fall behind the rate of inflation. Earnings in March shot up by 9.9 percent on the year, regular earnings excluding bonuses fell by 1.9 percent although wages excluding bonuses jumped 4.2 percent in the first quarter.

GettyImages 1240618833 1 (Photo by JUSTIN TALLIS/AFP via Getty Images)

The figures suggest that the latest 6.6 percent increase in the national living wage will not do as much as ministers had intended. New minimum wage rates are proposed each year by the Low Pay Commission. There is an explicit government target for the National Living Wage – two-thirds of the national median wage by 2024, conditional on wider economic conditions.

However, average wage growth, despite being accelerated, is still failing to keep pace with inflation.

According to a last year’s survey, 21-23 percent of retail firms said they had responded to past minimum wage increases by raising their prices.

As stores may not have the ability to reduce profits, it seems likely that they will respond to the minimum wage increase by adjusting their prices and figuring out further the best possible ways to make their workers more productive.

More for you

vape and cigarette
Photo: iStock

One in five ex-smokers in England now vape, study finds


Summary
1. One in five people who have successfully quit smoking in England currently vape, with an estimated 2.2 million individuals using e-cigarettes as a smoking cessation tool.
2. The increase in vaping among ex-smokers is largely driven by the use of e-cigarettes in quit attempts, with a rise in vaping uptake among people who had previously quit smoking for many years before taking up vaping.
3. While vaping may be a less harmful option compared to smoking, there are concerns about the potential long-term implications of vaping on relapse risk and nicotine addiction. Further research is needed to assess the impact of vaping on smoking cessation outcomes.


Keep ReadingShow less
Bira engages with Treasury on Budget fallout, business rate reform
(Photo by Christopher Furlong/Getty Images)
Getty Images

Bira engages with Treasury on Budget fallout, business rate reform

Independent retailers association Bira has held a meeting with members of the Treasury team to discuss concerns following its robust response to the Government’s recent Budget announcement.

The Budget, labelled by Bira as "devastating" for independent retailers, was met with widespread indignation from Bira members.

Keep ReadingShow less
East of England Co-op achieves 70 per cent productivity boost with Electronic Shelf Labels

East of England Co-op achieves 70 per cent productivity boost with Electronic Shelf Labels

East of England Co-op said it has improved labour productivity whilst improving customer service delivery in-store with an Electronic Shelf Label (ESL) solution from Pricer, the leading in-store automation and communication solutions provider.

Established in 1861, East of England Co-op is now the largest independent retailer operating in the East of England. In addition to the 120 food stores it operates in the region, the regional cooperative also offers customers specialist services, such as funerals, security, travel agents and petrol filling stations across Essex, Suffolk, Norfolk, Cambridgeshire and Hertfordshire.

Keep ReadingShow less
PayPoint

PayPoint delivers strong half-year results; retail network crosses 30,000 sites

PayPoint Plc has on Thursday has announced a robust financial performance for the half year ending 30 September, making continued progress towards achieving an underlying EBITDA of £100 million by the end of FY26.

The company’s UK retail network increased to 30,151 sites during the period, from 29,149 at the end of the previous fiscal year. 70 per cent of these are independent retailers, and the rest in multiple retail groups.

Keep ReadingShow less
Johnson & Johnson office

Johnson & Johnson office in Irvine, California

Photo by Mario Tama/Getty Images

Johnson & Johnson risks UK lawsuit over talc cancer claim

UK claimants announced Wednesday legal action against US pharmaceutical and cosmetics giant Johnson & Johnson, alleging that women diagnosed with cancers were exposed to asbestos in the company's talcum powder.

J&J risks UK court action for the first time over the allegations, having faced a series of similar lawsuits in North America.

Keep ReadingShow less