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J Sainsbury is axing 3,000 jobs, including senior managers, as the UK’s second-largest supermarket chain accelerates cost-cutting after the Labour government increased taxes on employers in its October Budget.
The redundancies, which amount to 2 per cent of the group’s workforce, will result from the closure of its 61 remaining in-store cafés and sweeping changes at management level.
About 20 per cent of senior management roles are expected to be axed, Sainsbury’s said on Thursday.
The decision comes after dozens of large UK retailers, including Sainsbury’s, warned in November that the higher costs arising from the Budget would feed through into job losses and higher prices for customers.
The move by one of the UK’s biggest private-sector employers will make for awkward timing for the chancellor, Rachel Reeves, who is meanwhile attempting to woo business leaders and foreign investors at the World Economic Forum in Davos.
More than half of UK retailers said that they would reduce the number of hours for their workers, as well as head-office headcount, according to a survey of finance chiefs earlier this month by the British Retail Consortium.
Sainsbury’s job cuts follow an announcement by the company last year that it would cut a further £1bn in costs over the next three years.
The reorganisation also comes amid what chief executive Simon Roberts called “a particularly challenging cost environment” as retailers battle rising costs and taxes.
The retail sector has forecast bigger annual costs of up to £7bn, largely stemming from increases in national insurance contributions and the national living wage.
Sainsbury’s is facing a £140mn hit to its tax bill from the Budget. Some of the changes to its workforce were partly driven by this, according to one person familiar with the decision.
In October, Reeves announced that the rate of employers’ national insurance contributions would rise 1.2 percentage points to 15 per cent from April while the earnings threshold at which the tax kicks in would be reduced from £9,100 to £5,000.
The minimum wage is also set to rise, adding to employers’ cost pressures.
Andrew Griffith, the shadow business secretary, said: “This news from one of Britain’s biggest retailers is devastating but no surprise. Thanks to Labour’s budget 3,000 jobs will be lost and 3,000 families will suffer without the security of regular pay.”
The grocery chain said it was overhauling the structure of its central management teams “to support faster decision making and drive performance” at both Sainsbury’s and Argos, which is also owned by the group.
This would lead to fewer, bigger head office roles with clearer accountability, the company said, adding that the changes would take effect in coming months.
Roberts said the business “had to make tough choices about where we can afford to invest and where we need to do things differently to make our business more efficient and effective”.
Clive Black, head of consumer research at Shore Capital, said Sainsbury’s had unveiled “further, increasingly necessary steps post the autumn Budget, to manage its cost base to enable ongoing investment”.
“Whilst very difficult, such steps are necessary to us, especially in the face of very considerable UK government-sourced cost expansion,” he added.
Separately, the finance chief of Associated British Foods, which owns fashion chain Primark, warned that consumers were holding back from buying clothes partly because of increasing uncertainty over the security of their jobs.
On Thursday, the company blamed cautious consumers in its core UK market as it cut Primark’s sales forecast for 2025.
Chief financial officer Eoin Tonge said that “other businesses — not us — start to talk about employment levels and recruitment, and the recruitment of temporary workers” and “the spectre of unemployment seems to rise”, having a knock on impact on consumer sentiment.
He added: “We’re seeing, especially in those lower income brackets, consumers being more [choiceful] around their purchasing habits.
“We need a different narrative, we need more upbeat, positive, front-foot narrative to get some energy back into the system.”