Retail sector hit by major redundancies

Several large-scale cases of job loss have recently hit the UK commerce sector. Among the companies affected is the Woolworths retail chain, whose closure led to 27,000 immediate job losses in the UK. A number of other major retailers have also been affected. Trade unions have reacted angrily to the redundancies and called for greater state intervention to support the economy.

The UK commerce sector has recently been struck by several large-scale cases of job loss. Since 1 December 2008, the European Restructuring Monitor (ERM) has recorded 34,582 announced job losses altogether within the sector (see ERM [factsheets](/search/node/emcc OR erm OR index.php?oldIndex) for details). Over 90% of these job cuts are attributable to bankruptcy or closure.

Details of job losses

In recent months, several high-profile companies within the UK commerce sector have announced major job losses, as follows.

• The largest and most well-publicised case of job loss within the sector was the bankruptcy and closure of the high-street retailer Woolworths. On 22 December 2008, Woolworths made the announcement that it was to close all of its 807 outlets in the UK, resulting in the immediate loss of 27,000 jobs. The company attributed this decision to long-term profitability problems and the adverse trading conditions within the sector.

• The furniture retailer, MFI, became bankrupt and on 19 December announced its decision to close its UK outlets, leading to the loss of 1,400 jobs. A greetings cards retailer, the Celebrations Group, also made the announcement that it was to close its outlets in the UK, resulting in some 1,400 job losses. Both companies attributed the bankruptcies and closures to adverse trading conditions.

• Other companies within the sector also announced major job losses. On 7 January 2009, the large high-street retailer, Marks and Spencer, announced its decision to cut 1,230 jobs in the UK. Meanwhile, the children’s clothes retailer, Adams, cited bankruptcy and made the announcement on 5 January 2009 that it was to close 111 of its 271 stores, resulting in the loss of 850 jobs. The remaining stores will stay open for business in the interim while administrators attempt to find a buyer.

Economists and policymakers also appear to be pessimistic about the prospects for the sector in the coming months. A study published by the Centre for Economics and Business Research (CEBR) predicted an ‘avalanche of job losses’ within the commerce sector and forecast between 100,000 and 135,000 job losses within the sector for 2009.

Trade union reaction

Trade unions in the UK have reacted angrily to the job losses within the sector, and have also strongly criticised the liberal ‘hire and fire’ regulations that characterise the UK labour market.

Speaking at the time of the announcement of the Woolworths’ job losses, a National Officer at the Union of Shop, Distributive and Allied Workers (USDAW), John Gorle, remarked:

We are shocked that staff will only be given 10 days’ notice of store closures and deeply disappointed by the news that no buyer has yet been found for Woolworths. Redundancy is devastating at any time of the year, but particularly so at Christmas.

The Joint General Secretary of the general UK trade union Unite, Derek Simpson, reacted to the job losses within the commerce sector, and more generally, by advancing a broader critique of the UK’s existing system of economic and social regulation, highlighting that:

It has been an extremely bleak beginning to the new year and there’s no doubt that 2009 is going to be very tough for working families across the country. For the staff at companies like ... M&S and Woolworths, it’s been a devastating week. It’s time to put the laissez-faire policies of the last three decades behind us ... Unite believes it’s time to begin a new era of cooperation between government, business and unions which focuses on strategic intervention to support the growth of jobs and the economy.

Commentary

The high levels of collective redundancies that have hit the UK commerce sector are significant on several levels. First, the sector is the UK’s third largest employer and its performance is regarded by economists as a crucial indicator of consumer confidence. Poor performance by companies and large levels of collective redundancies are therefore likely to have a major impact on the UK economy as a whole. Large-scale job loss announcements in the larger companies within the sector are also likely to imply that significant job losses are occurring in smaller firms operating in the sector. The fact that the typical size of companies in the sector is small – and that no statutory obligation exists in the UK to report to the public authorities redundancies below 20 – will also raise questions over the current procedures in place in the UK for measuring redundancies.

Thomas Prosser, IRRU, University of Warwick