Marks & Spencer's chairman Archie Norman has sounded the alarm over "big regulatory headwinds" stifling business investment in the UK, highlighting rising tax burdens and employment costs as key barriers. Speaking at the retailer's annual general meeting, Mr Norman warned that these increasing expenses are making it harder for companies to prosper in Britain.
His comments join a chorus of criticism from leading retail figures, who have slammed proposed policy changes, including Labour's plans to hike employers' National Insurance contributions (NICs) and minimum wage rates. The Next chairman, Lord Simon Wolfson, has also cautioned that restrictions on zero-hour contracts would make it "much harder" for retailers to offer additional hours to staff. Meanwhile, AO World's CEO revealed that the electrical retailer had shifted most of its sales jobs overseas to mitigate high employment costs in the UK.
Marks & Spencer itself is feeling the pinch, with an additional £150 million in taxes incurred this year, including a £14 million charge from the Extended Producer Responsibility (EPR) levy on non-renewable packaging. This "massive dent" in profitability has impacted M&S' ability to raise staff pay, despite hourly wages being among the best in the retail industry over the past three years.
The retailer's financial performance has been hit by a range of challenges, including a 29% slump in profits to £365 million for the year to March. This was partly due to a £131 million cyber-attack hit in April last year, which disrupted its website and led to supply chain issues. In response, M&S cut bonuses for all staff members to shore up its finances.
Despite these headwinds, the M&S Food arm has emerged as a key driver of recovery, with sales increasing by 7% to £9.7 billion during the period. On Tuesday, M&S shares remained flat at 382p, having seen a 16% gain year-to-date, reflecting investor sentiment amidst the challenges and strategic efforts.
The broader implications of these rising costs are significant for UK households and businesses. Increased employment costs can lead to slower wage growth, reduced investment in expansion, and potentially higher prices for consumers as companies pass on additional expenses. For mortgage holders and savers, the economic environment shaped by these factors can influence Bank of England decisions on interest rates, although a direct causal link is not immediate.