THE head of online consumer electronics retailer Buy it Direct has warned he will have to shed 20 per cent of his workforce within two years when the national living wage comes into force next month.
Managing director Nick Glynne said the sudden and escalating increase in costs that the Government measure would bring would force him to reduce his dependency on staff.
The business, which sells goods including computer equipment, televisions and household appliances, has a £130m turnover and employs 250 staff, most of whom are based in Huddersfield.
The company also has a warehouse in Nottingham.
Mr Glynne said his board had already started putting plans in place to introduce warehouse automation. It also plans to scale back its Huddersfield call centre by moving some of it overseas.
Speaking to the Yorkshire Post, Mr Glynne said: “The national living wage is nothing but a severe and draconian tax on employment. I have spoken to some big retailers and everyone is seriously worried about it.”
Mr Glynne emailed Jason McCartney, Conservative MP for Colne Valley to highlight his concerns. Mr McCartney has promised to raise the matter with Chancellor George Osborne, sending him a copy of Mr Glynne’s email for a full response.
Mr Glynne said: “Not only will we have to put wages up for those on minimum wage by over four times the rate of inflation but we will also need to push the majority of wages of our staff up to maintain the differential.”
He added: “By 2020, that wipes out our entire profitability.”
Research by the Social Market Foundation and the Adecco group found that one in four firms will be affected by the new national living wage, with many having to overcome “significant productivity challenges” to cope with the rate.
Retail and hospitality businesses are expected to be among those most affected.
Mr Glynne said: “The recovery from the recession is very fragile and the last thing this country needs is a new wave of job cutting and under-investment. But that is precisely what most business owners employing lots of staff close to the minimum wage will be forced to do. They will look to automate to reduce staff and will scale back investment due to the damage to profitability.”
He added: “If the wage rises were offset with a corresponding lowering of corporation tax or employers national insurance, I could well understand their thinking but to suddenly heap a whole lot of costs onto business is short-sighted for the economy, insulting to businesses who have fought hard to get through the recession and will likely be counter-productive for employees as more people are put out of work.”