Asda deal with Sainsbury's '˜could see 2,500 jobs put at risk'

The proposed merger between supermarket giants Sainsbury's and Leeds could result in the loss of up to 2,500 supply chain jobs, a think tank has warned.

Date: 30th April 2018. Picture James Hardisty. Sainsbury, the UK's second-biggest food retailer, has struck a deal to take over Walmart subsidiary Asda, creating Britain's biggest grocer by market share. Pictured Shane Walker, of Leeds, shopping at Asda, Owlcotes, Leeds.

Analysis by the New Economics Foundation (NEF) has found that the claims from both supermarkets that a merger would lower prices for consumers by 10 per cent would have to met by businesses in its core supply chains.

Following these reports, analysts at NEF have looked at the potential impact on jobs in the supply chain and concluded that a five per cent cut in output for these suppliers could lead to a loss of more than 1,200 jobs, while a 10 per cent cut could lead to a loss of up to 2,500 jobs.

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The NEF added that 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.

Both stores have repeatedly ruled out direct job losses and store closures and rejected the think tank’s claims on supply chain jobs.

Alfie Stirling, Head of Economic at the New Economics Foundation, 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 per cent of all UK companies, 60 per cent of employment and nearly half of turnover, yet they are repeatedly required to play second fiddle.”

What does the proposed merger of Asda and Sainsbury's mean for the public?

The NEF defined core suppliers as those involved in the production or wholesale of food articles, as well as services in transportation, warehousing and advertisement.

It added that, due its figures and analysis are based on data from 2015 supply and use tables and weighted by an estimate for the proportion of final retail sales made at Asda and Sainsbury’s combined, that the estimated job losses would lower as GDP growth has exceeded inflation since 2015.

The shock tie-up is the result of negotiations lasting more than a year but only came to light last weekend.

In announcement to the Stock Exchange both firms announced they wanted to create a supermarket titan bigger than Tesco with revenues of £51 billion and a network of 2,800 Sainsbury’s, Asda and Argos stores.

Undated handout photo issued by The Finsbury Group of (left to right) Mike Coupe, CEO of J Sainsbury, Judith McKenna, President and CEO of Walmart International and Roger Burnley, President and CEO of Asda. Sainsbury's has confirmed it has agreed terms for a £12 billion merger with Walmart-owned Asda, setting the stage for one of the most audacious deals in British retail history

The proposals for a combined business will be subject to massive regulatory scrutiny from the Competition and Markets Commission with concerns raised that Asda may be required to dispose of some of its stores in order to meet the competition threshold.

An Asda spokesperson said: “Customers have had it tough for a long time. They need and demand lower prices and even better quality. The proposed combination of Asda and Sainsbury’s is the best way to accelerate our strategy to exceed customers’ expectations. 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.”

A sokesperson for Sainsbury’s added: “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.”