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A woman pushes a shopping cart at a Tesco supermarket in Hatfield, Britain. Picture: REUTERS/PETER CZIBORRA
A woman pushes a shopping cart at a Tesco supermarket in Hatfield, Britain. Picture: REUTERS/PETER CZIBORRA

Britain’s biggest supermarkets are increasing pay to retain workers as rising inflation causes the worst cost-of-living crisis in decades.

Tesco , the country’s largest grocer, said on Thursday that it’s lifting wages by almost 6%. Smaller rival J Sainsbury told staff on Friday that from May all workers will receive the so-called real living wage — currently £11.05 pounds (R211) in London and slightly lower outside the capital. 

The moves show how British companies are being forced to respond to the cost-of-living crisis, which is pinching consumer budgets as the prices of fuel, energy and food soar. UK supermarket employees are among those worst-affected, with an increasing number using food banks, according to the Independent Food Aid Network. 

Sainsbury said this is the second time it is amending its pay for staff since January as it seeks to help shop workers deal with the increasing cost of living. 

“We know times are tough for everyone,” said CEO Simon Roberts.

Other companies across Britain are also facing demands for higher pay. Telecommunications company BT on Thursday announced a £1,500 increase for its workers, calling it the biggest award in two decades. However, the Communications Workers Union, which represents nearly half of its staff, said the offer was “insulting” at a time when inflation is surging.  

The Bank of England says higher wages threaten to cause an upward spiral in prices. Policymakers have boosted interest rates three times since December and are expected to act again as early as next month to clamp down on inflationary forces.

Consumer prices rose 6.2% in February, and the central bank has warned inflation could hit double digits by the end of the year, fuelled by a surge in energy, food and clothing prices. Pay growth eased during the coronavirus lockdowns in 2020 and then surged as much as 8.8% in the middle of last year as the economy reopened and companies struggled to find workers.

Wage increases since then have settled down to a more moderate pace of under 5%, though Britain’s low productivity levels mean even that level may be more inflationary than in years past. The BOE’s target is to keep inflation to 2%.

British businesses facing pay rise requests have to balance those with the need to invest in the business at a time when costs are soaring and supply-chain problems and geopolitical concerns are weighing on sentiment. This is particularly difficult for supermarkets, which collectively employ hundreds of thousands of people and operate in a highly competitive industry that’s being disrupted by the growth of discounters and online shopping. 

Tesco is increasing the hourly rate for shop and warehouse workers to £10.10 from July 24, with staff in London receiving £10.78 an hour. Truck drivers, who are in strong demand as online grocer ordering takes off, will receive £11 hourly. The company said that while it normally agrees to two-year deals with union workers, it will review wages again next year because of the uncertainty in the economy.

Sainsbury’s enhanced pay will make it the highest payer in the UK industry and the first grocer to provide the real living wage to supermarket employees, who were designated as key workers by the government during the pandemic.   

The real living wage is the minimum hourly rate necessary for workers to afford housing, food and other basic needs, according to the Living Wage Foundation. Sainsbury workers in central London were already receiving the £11.05 hourly rate; those in outer parts of the capital will now get it as well, while those in other regions of the UK will receive £10 an hour — 10 pence above the real living wage for those regions.

Sainsbury was already facing a demand from more than 100 shareholders including HSBC to pay the higher living wage to all its employees. The resolution was to be voted on at the annual meeting later this year. 

Even before the cost-of-living crisis, supermarkets, which for many years were among the lowest-paying sectors in Britain, felt pressure to increase wages as competition for staff became more intense. Britain’s exit from the EU- for years a ready source of labour — has worsened labour shortages.  

Tesco said its latest increase means that its hourly rate of pay has increased by more than 40% in the past decade. Sainsbury’s hourly level has increased by about 25% over the past five years. Since the grocer acquired electronics retailer Argos in 2016 it has increased staff wages there by about 39%.

BOE governor Andrew Bailey in February urged workers to hold off on inflation-busting pay demands, saying policymakers would have to respond with higher borrowing costs. That drew jeers from union and research groups concerned that wages are failing to keep up with rising prices, delivering the biggest squeeze on living standards since the 1970s.

More stories like this are available on bloomberg.com


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