The proposed merger between retail giants Sainsburys and Asda could threaten jobs in the supply chain.
Up to 2,500 jobs could be at risk, according to think-tank New Economics Foundation.
Merger saving money
The idea behind the merger is to partner up two supermarkets and create a shopping choice which is better for all customers. Sainsburys say that they can reduce the price of everyday items by up to 10% when their supply chain is condensed, and they also say that they won’t be prepared to shut any stores. That means that there will be a large number of retail food jobs which are kept safe, so long as the Competition and Markets Authority does not consider the large amount of stores to represent a significant monopoly risk.
Once put together, the two retailers will have a combined store figure of 2,800 sites, and they will also represent annual sales of £51 billion according to 2017’s statistics. Needless to say, this is a big move, and will represent a huge change in the retail marketplace.
However, not everyone sees the idea in a positive light. Alfie Stirling is the head of economics at the New Economics Foundation, or NEF. He 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. 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.”
Job risk for supply chain
There is also huge concern about what may happen to supply chain jobs. The NEF review suggests that passing on the 10% price cut to core suppliers as well as merging the needs of the two retailers may lead to between a 5 to 10% cut in output. This would mean a loss of between 1,200 and 2,500 jobs.
A statement from the report reads, “The total job losses related to a cut in prices for supermarket suppliers could be higher in reality, as these estimates do not cover the total supply chain, or 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.”
A spokesperson from Sainsbury’s made it clear that the company does not agree with the report’s findings. They said: “We strongly refute the NEF’s methodology and conclusions. A more resilient business, with lower prices and increased sales will result in higher volumes for suppliers. The proposed combination would create opportunities for suppliers, as well as for customers, colleagues and shareholders.”
An Asda spokesperson added: “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.”
However, the NEF is not the only body to have expressed concerns about the merger. If it does go ahead, there will need to be in-depth examination of all possible outcomes from the government’s investigative bodies, which is a process that will surely take time. We are not likely to see a sudden resolution of the problem, or an announcement that the merger is definitely going ahead, in the near future.