Primark is set to embrace increased automation in response to substantial tax hikes impacting its workforce.
- With a predicted reduction in UK employees, Primark plans to mitigate rising costs by expanding self-checkouts and automating warehouses.
- The increase in employers’ National Insurance contributions could lead to significant cost implications for Primark.
- Despite revenue and profit growth, Primark underscores the necessity for cost-saving measures amidst economic changes.
- Primark aims to leverage the increased minimum wage by attracting more budget-conscious consumers.
Primark is making a strategic shift towards automation to tackle the financial challenges posed by recent tax hikes. The retailer anticipates a reduction in its UK workforce as it enhances its use of self-checkouts and warehouse automation.
George Weston, CEO of Primark’s parent company Associated British Foods (ABF), highlighted the impact of the increased National Insurance contributions. ‘We employ about 40,000 people in the UK, so the increase is a very big number indeed,’ Weston remarked, indicating the financial strain on the company.
The government’s decision to raise employers’ National Insurance contributions from 13.8% to 15% and reduce the earnings threshold to £5,000 is expected to generate £25bn annually, with £2.3bn affecting retail businesses.
Despite Primark’s reluctance to adjust its pricing, the company is focusing on cost savings through enhanced self-checkout systems, which are part of a broader store refurbishment strategy. By the end of the financial year, around 170 to 180 stores are expected to be equipped with these units.
Primark’s recent financial report showed a 6% rise in revenue to £9.4bn, attributing success to improved store experiences and digital engagement. Operating profit saw a significant growth of 53% to £1.1bn due to lower material costs and reduced freight expenses.
However, Weston acknowledges that these savings alone are insufficient to counterbalance the increased costs from National Insurance and anticipated wage hikes. He foresees the need for continued sales growth to sustain the business.
With the UK’s minimum wage set to rise by 6.7% next year, Weston suggests this could provide consumers with more disposable income. He expressed hope that families with limited financial means might find themselves better positioned to shop at Primark.
Primark’s strategic focus on automation and cost savings aims to navigate the complexities of economic pressures and evolving consumer behaviour.
