Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Retail veteran and Asda chair Lord Stuart Rose on Friday was the latest business leader to criticise last week’s Budget measures, saying they would lead to higher inflation and a slowdown in hiring and pay increases.
Rose said the supermarket chain’s annual tax bill would go up by £100mn following UK chancellor Rachel Reeves’ changes to national insurance contributions, including cutting the threshold at which employers start paying the tax, which he called “the killer” as it took most businesses by surprise. Asda employs about 148,000 staff.
He said he did not want to pass on the increase in business costs to customers but the changes would be “inflationary” and it “would put a lot of pressure on the business”.
“It’s not going to encourage you to employ more staff,” added Rose, saying the upcoming increase in the national minimum wage “will cause us to reflect about what we do in terms of pay rises next year”.
Rose joined a chorus of businesses this week warning about the impact the Budget would have on their costs as well as consumers, who face price increases as a result.
In response to criticism from large employers over the Budget changes a Treasury spokesperson said the government “had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability to allow businesses to thrive”.
“This government is committed to delivering economic growth by boosting investment and rebuilding Britain,” they added.
In September Rose took day-to-day responsibility for leading the UK’s third largest supermarket, alongside Rob Hattrell, an executive at TDR, the private equity firm that owns a majority stake in Asda, after its billionaire co-owner Mohsin Issa stepped down from running it.
Asda, which Walmart sold to the Issa brothers and TDR in a £6.8bn deal in 2020, continues a protracted search for a new chief executive. This week it cut almost 500 head office jobs.
“They [cuts] were always going to be on the cards,” Rose said. “Since Rob and I have been more actively involved in the business, we have recognised we have been a bit distracted . . . [and] our decision-making could be sharper and faster.” Redundancies were “never easy, but necessary” he added, and did not rule out more cuts.
Walmart still holds a 10 per cent stake in Asda, but separating the chain’s IT systems from its former US owner has been complex and costly. The group has been grappling with product availability issues, store cleanliness and poor customer experience in recent months.
It has lost out to competitors this year, leaving it with a 12.6 per cent share of the grocery market in the 12 weeks to September 29, down from 13.7 per cent in the same period a year earlier.
Hattrell said Asda was almost finished with disentangling its systems from those of Walmart, having had to separate more than 2,500 systems.
On Friday, Asda posted a 2.5 per cent decline in total revenues, excluding fuel, for the quarter ending September 30, with a 4.8 per cent drop in like-for-like sales.
Its net debt during the period was £3.8bn, a £100mn reduction on the previous quarter, the company said, adding it was “committed to further deleveraging”.