UP to 2,500 jobs are at risk in the event of a Sainsbury’s-Asda merger, according to a study by a public policy think tank.
Analysis from the New Economics Foundation shows that the price cuts passed onto suppliers puts up to 2,500 jobs in core super market supply chains could be at risk in the wake of the proposed merger of Sainsbury’s and Asda.
The grocery giants are working on a £15 billion deal to unite the brands to become the biggest grocery seller in the UK.
Sainsbury’s have reportedly claimed that the merger could lead to lower prices of up to 10% for consumers.
Direct job losses and store closures have been ruled out, but many, including MPs, have warned about “monopoly towns” where the proposed merger of the two chains will leave little or no major supermarket competition.
Sainsbury’s boss Mike Coupe – who had to apologise after being caught on camera singing We’re In The Money following the merger announcement – has admitted some stores could be sold off to rivals if competition regulators get strict.
Some business experts say store closures are inevitable in the long run, however, with some estimates putting store closures at around 75.
The analysis from the New Economics Foundation – a left leaning think tank which aims to help build a “new economy where people are really in control” – follows reports that lower consumer prices will be met at least in part through negotiating lower prices with suppliers.
Following these reports, analysts looked at the potential impact on jobs in the supply chain of major supermarkets, in the event that either all or some of the price cuts are passed on to core suppliers of food products and logistical services.
The analysis found that a 5% cut in output for these suppliers could lead to a loss of more than 1,200 jobs, while a 10% cut could lead to a loss of up to 2,500 jobs.
Estimates of job losses down the supply chain are based on the assumption that supply chain output will fall due to a drop in supermarket retail prices being passed through to output prices for suppliers.
The think tank warned that the total job losses related to a cut in prices for supermarket suppliers could be higher in reality as the estimates do not cover the total supply chain. In addition, the numbers don’t cover the further impact of lost demand in local economies from reduced spending by companies, employees and their families, which could lead to further business closures and job losses outside of supermarket supply chains.
In the study, “core” suppliers as those involved in the production or wholesale of food articles, as well as services in transportation, warehousing and advertisement.
Alfie Stirling, head of economics at the New Economics Foundation, said: “If the proposed merger between Sainsbury’s and Asda is allowed to proceed, we are likely to see a classic case of monopoly like power in a market where things are already heavily stacked towards the ‘big guys’.
“This is part of a broader picture, where time and again UK capitalism shows itself to be geared against small business in a way rarely seen in the rest of western Europe.
Stirling added: “Small and medium sized firms make up more than 99% of all UK companies, 60% of employment and nearly half of turnover, yet they are repeatedly required to play second fiddle.”
An Asda spokesperson said: "Customers have had it tough for a long time. They need and demand lower prices and even better quality. The proposed combination of Asda and Sainsbury's is the best way to accelerate our strategy to exceed customers' expectations. If it's good for customers, volumes grow which is good for suppliers, with whom we have established long-term relationships. On that basis, this is an opportunity to grow together."
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