In the high volume, low margin wholesale model, increases in operating costs cannot easily be absorbed and can result in increased costs in the food and drink supply chain. FWD makes the case to the government and regulators for better regulation of businesses in this sector and for it to be necessary, effective and proportionate.
FWD members support the National Minimum Wage (NMW) although members are concerned about the wider impact of frequent above-inflation rises in NMW. We are concerned that the National Living Wage could severely restrict the profitability of our members, should the proposed target of over £9 by 2020 be pursued.
Our report, Delivering Employment, outlines the added cost to our sector, and explores how wholesale distributors would be forced to cut jobs and services to meet the rises.
FWD engages with the Low Pay Commission to look at how the lowest-paid can be fairly rewarded without imposing costs on employers that would ultimately result in a reduction of head count.
FWD believes that current Sunday trading regulations, which limit the number of hours larger stores can open, should be maintained. This will benefit our high streets and local communities.
December 5: FWD’s submission and evidence to the Low Pay Commission’s recommendations for increased National Living Wage and National Minimum Wage rates to come into force from 1 April 2019, which were adopted by the Government, are substantially quoted in the LPC’s report which contain the analysis and evidence used to make these recommendations.
The report states:
“The Federation of Wholesale Distributors (FWD) emphasised that wholesale is a sector particularly affected by the impact of the NLW; in 2015, around 30 per cent of its workers earned less than the £7.20 threshold before its introduction.
“The FWD told us that the introduction of the NLW has had negative employment effects in whole sale and distribution, though it acknowledged that other factors (automation and increasing ef ficiency) are contributing to this trend in the sector. Smaller firms in the sector were more likely to be affected, it said, with larger operators largely paying above the NLW.
“The FWD told us it thought the NLW had led to more investment training of low-paid staff, al though some businesses have had to cut back on benefits and incentives.
“In wholesale, the FWD thought automation had increased and would continue to do so. It predict ed, though, that smaller operators would be less able to increase productivity through automation.
“Supermarkets were cited by several sectors as limiting firms’ ability to raise prices – not only in retail, but food processing, textiles and wholesale businesses as well.
“The FWD called for [NLW] increases to be no higher than inflation to avoid negative consequences for employers and workers.”
Chancellor Philip Hammond’s October 29 Budget included a mix of tricks and treats for wholesalers:
Tax and duties
Skills and Apprenticeships
FWD recommended that the LPC should set wage rates which do not negatively impacting the labour market and should act conservatively when setting the NLW rate for 2019, to re ect reported declines in projections for median earnings and the likely impact of prevailing economic uncertainty on the economy. Rates should be increased by no more than in ation. Our submission stated:
Since April 2016, almost half (47%) of members surveyed said the NMW had increased their wage bill to a large extent. An additional 26% said it has increased but to a smaller extent. The majority of respondents also said it has reduced pro ts.
In addition to a signi cant increase in the wage bill, members surveyed said the other main impact was on wage differentials, signi cantly eroding the relative rate of pay members are able to offer, oftenpaying those with more senior jobs the same or just slightly more than workers with little responsibility or experience, making them less able to attract and retain staff.
Mitigating measures taken included not replacing staff once they have left, taking lower pro ts and absorbing the costs, and a reduction in staff employment bene ts such as discounts, bonuses and training.
79% of members said they are concerned by the 2019 target rate for the National Living Wage and 42% of these said it is a pressing issue for the business.
58% would like the NLW to be increased no more than the rate of in ation, while 21% asked for the NLWto be frozen. Regarding the other rates of the minimum wage, 68% of respondents asked for these rates tobe increased by no more than the rate of in ation and 21% said they should be increased by average wageearnings for 2019.
37% of members identified that younger workers are less productive and therefore additional trainingand investment is required.
A consultation on how digital payments could be supported, including looking at the cost to business, and the future of cash, to ensure that the ability to pay by cash is available for those who need it, whilst cracking down on those who use cash to evade tax and launder money.
A further consultation on the threshold for registration for VAT has been published, looking at further simplification options, and in particular at why businesses choose not to grow beyond the current £85,000 threshold. The paper looks at three options, one a harmonised EU approach, one involving administrative changes and one that involves a smoothing of the cliff-edge currently experienced at the threshold.
The Government announced that the next business rates revaluation will take place in 2021, one year earlier than previously planned. Subsequent revaluations will take place every three years. In practice thismeans that the revaluation process will begin from around April 2019 with rental value/business performance based on the financial year 2018-19.
A proposal to support small businesses with the apprenticeship regime, with additional funding of about £80 million. Funding will additionally be made available to support businesses with the introduction of the new T-levels and the work placement element. Departmental funding allocations were also announced as part of the Brexit contingency fund, to allow changes to be put in place to get the UK prepared for leaving the EU.
More from the Chancellor’s Spring Statement