Sainsbury’s/Asda merger could cost 2,500 supplier jobs

By Aidan Fortune contact

- Last updated on GMT

The New Economics Foundation believes that proposed price cuts could hit suppliers hard
The New Economics Foundation believes that proposed price cuts could hit suppliers hard
The merger of retail chains Sainsbury’s and Asda could result in the loss of up to 2,500 jobs, according to think-tank New Economics Foundation (NEF).

Announced last month, the two retailers plan to create an entity​ with annualised sales of £51bn in 2017 and a combined store footprint of 2,800 sites. The Competition and Markets Authority is expected to review the merger.

As part of the merger, Sainsbury’s hopes to reduce the price of “everyday items”​ by as much as 10%, as well as ruling out store closures or job losses.

However, the NEF review examined the potential impact on jobs in the supply chain of major supermarkets, in the event that either all or some of a 10% price cut was passed on to core suppliers of food products and logistical services.

Its analysis showed that a 5% cut in output for these suppliers could lead to a loss of more than1,200 jobs, while a 10% cut could lead to a loss of up to 2,500 jobs.

The analysis added: “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.”

Alfie Stirling, head of economics at NEF, 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.”

Some independent analysts have already expressed concern for suppliers about the deal.

In response, a spokesperson for Sainsbury’s 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.”

Related topics: Business News, Supply Chain

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