Retail job cuts: is there any end in sight?

From River Island to Debenhams to Dixons Carphone, and from Boots to John Lewis to Marks & Spencer, retailers have collectively been culling thousands of jobs over the last few months.

According to the  Confederation of British Industry (CBI), retail employment fell in the year to August at its fastest rate since February 2009, as retail sales continued to suffer from the effects of the pandemic.

Now that the country is officially in recession, it seems inevitable that yet more job losses are on the horizon.

As the furlough scheme begins to wind down with an October end date in sight, retailers will have to make some tough decisions when it comes to who stays and who goes – and more than 200,000 retail jobs are likely to be axed, according to the Centre for Retail Research (CRR).

Looming losses

Already 121,000 jobs have been lost in the retail industry since lockdown began, the CRR calculates, but it could get much worse.

“In total, about 3 million jobs could be lost if the furlough scheme doesn’t get extended, and retail is a major user of the scheme,” says think thank IPPR’s senior economist Carsten Jung.

“Over the course of the crisis, retail had more than 1.7 million people on furlough. While that number has now come down, it’s still the sector that used it the most – meaning a large chunk of those job losses could highly likely come from retail.”

“We are witnessing a progressive rationalisation of the sector. A lot of people will keep going for the seasonal peak. For some, it will then be a cold January”

Archie Norman, Marks & Spencer

The end of the furlough scheme, set for October 31, could be a turning point for retail job losses. Experts and industry chiefs envisage that how the Christmas peak period plays out will also dictate the direction of employment, along with the effects of an ongoing shift in shopper behaviour.

Marks & Spencer chair Archie Norman observes: “It is a very lopsided picture. The big food retailers and parts of online are doing fine, but the drop in demand has fallen heavily on certain types of retailer and specific locations. That will not revert any time soon.

“We are witnessing a progressive rationalisation of the sector. The wind-down of furlough will be a catalysing event, but a lot of people will keep going for the seasonal peak. For some, it will then be a cold January.”

CBI lead economist Alpesh Paleja says that the employers’ group’s latest data revealed a marked decline in retail sales and online orders year on year, which in turn may affect retailers’ ability to retain employees beyond the end of October.

“The furlough scheme has proved effective at insulating workers and businesses in some of the worst-hit sectors during the pandemic, but these findings reinforce fears that many job losses have been delayed, rather than avoided,” he says.

“Trading conditions for the retail sector remain tough, even against the backdrop of business slowly returning. Firms will be wary of deteriorating household incomes and the risk of further local lockdowns potentially hitting them in the pocket for a second time.

“As a result, further support may well be needed for the retail sector if demand continues to disappoint.”

Preventing future spikes

IPPR’s Jung proposes that the furlough scheme could be revised and extended in order to bridge the economic crisis and help abate the swathe of job losses across the sector. 

He calls for a part-time subsidy, in which workers are brought back for half their normal hours but paid their full salary – half covered by the employer and the other half by the government.

“Sharing work to save jobs is the best option to stimulate the economy and keep jobs long term”

Carsten Jung, IPPR

“The key thing to note is demand and sales are coming back. We are past the low point of the crisis and the economy is now around 20% below what it was before,” he says.

“We’re seeing that in retail as well – people are going back to the shops. What we are proposing is, rather than making people redundant now and fuelling the lower demand with fewer people, to keep all workers and let them work part-time while the economy recovers. Sharing work to save jobs is the best option to stimulate the economy and keep jobs long term.”

With retail’s traditional peak trading period approaching, Jung argues that his proposal should be in place in the run-up in order to give the industry the best chance of bouncing back in the new year.

“As things stand, the spike in job losses is likely going to be between now and October, because that’s when the scheme will end,” he says.

“I expect that will be the biggest spike, but by reforming the scheme we may be able to prevent it and build a bridge into the new year so companies can hold on to their workers.”

“Forcing employers to shed workers before this important [Christmas trading] period is a huge mistake. It will be damaging for businesses and it will be damaging for the economy,” he concludes.

Upskill and uphire

Covid-19 has cemented new consumer behaviour, including a definitive shift to online, meaning some retail roles will be more favoured than others.

Online goliath Amazon has hired more than 100,000 new workers across its network of distribution centres, while AO.com this week created 650 new positions as it chases further growth.

Even M&S, which axed 7,000 jobs last week, is seeking to hire in its online division, particularly in its fulfilment centres and warehouses. 

Delivery drivers and order pickers have been high on retailers’ lists in order to keep up with online demand. 

“The onus needs to be on how we create platforms for people to be better and how we create learning journeys for people to reskill”

 John Roberts, AO

Tesco said this week that it will hire 16,000 new employees in the coming weeks and months, including 10,000 pickers and 3,000 drivers.

AO chief executive John Roberts also suggests that some employees could and should have the potential to upskill themselves. 

While more frontline workers may be necessary as part of the online surge, head-office roles will also require a digital edge.

Roberts points to “incredible global ecommerce success stories” in the UK, such as The Hut Group, Asos and Boohoo, as examples of online businesses that are creating jobs and upskilling staff.

“The onus needs to be on how we create platforms for people to be better and how we create learning journeys for people to reskill,” he says.

“We have invested massively on our tech teams, on how we recruit them and train them ourselves.”  

Roberts concludes that many of the losses could be offset if traditional retailers really buy into the shift to online.

Long-term outlook

Roberts believes retailers will need to overhaul their own strategies if they hope to save jobs in the coming months, insisting that it is “retail’s own fault” for being so slow to adapt to the demands of the multichannel customer – an issue the furlough scheme cannot solve.

“I don’t think this is a government problem; it’s a retail problem. It’s not the government’s job to try to save Debenhams,” says Roberts.

However, British Retail Consortium chief executive Helen Dickinson believes that government intervention is needed – on long-standing issues such as business rates – if the retail industry is going to thrive and jobs are to be safeguarded.

“Without action, the recent job losses we’ve seen across the industry will be just the tip of the iceberg,” she says.

Whether Roberts or Dickinson are right, more redundancies certainly loom on the horizon for the retail industry.