Stock Markets
UK retailers crank up search for savings ahead of April tax hikes
By James Davey and Paul Sandle
LONDON (Reuters) -Britain’s big retailers, including Tesco (OTC:), Sainsbury (LON:)’s, M&S and Next (LON:), say they are stepping up their drive for efficiency through automation and other measures, to limit the impact of rising costs on the prices they charge their customers.
As the UK economy struggles to grow, the new Labour government’s solution is a hike in employer taxes to raise money for investment in infrastructure and public services, which has prompted criticism from the business community.
Retailers have said the increased social security payments, a rise in the national minimum wage, packaging levies and higher business rates – all coming in April – will cost the sector 7 billion pounds ($8.6 billion) a year.
Concerns of the wider economic impact sent retail share prices sharply lower this week and drove up government borrowing costs.
In the retail sector, larger players have more scope to adapt and are cushioned by previous healthy profits, but analysts have said smaller players could find themselves under severe pressure.
Clothing retailer Next said it faced a 67 million pounds increase in wage costs in its year to end-January 2026, but still forecast profit growth.
It reckons it can offset the higher wage bill with measures including a 1% increase in prices that it said was “unwelcome, but still lower than UK general inflation”. It can also increase operational efficiencies in its warehouses, distribution network and stores, the company said.
CEO Simon Wolfson said more automation was inevitable across the sector.
“With any mechanisation project you’re always looking at a pay-back on it – you’re saying ‘what’s the saving versus the cost of the mechanisation, or AI or software’,” he told Reuters.
“If the price of the mechanisation doesn’t go up, but the price of the labour it saves does go up, it’s going to mean that more projects can be justified.”
MORE ROBOTS?
Baker and food-to-go chain Greggs (LON:) last year opened a highly automated production line at its Newcastle, northeast England, site, meaning it can make up to 4 million more steak bakes and other products each week from its current 10 million.
Tesco, Britain’s biggest supermarket, is also increasing automation and will open a robotic chilled distribution centre in Aylesford, southeast England, this year.
No. 2 grocer Sainsbury’s is encouraging more shoppers to use its SmartShop handheld self-scanning technology.
Even though Tesco faces a 250 million pound annual hit from the hike in employer national insurance contributions alone, CEO Ken Murphy said it would cope.
Having navigated the COVID pandemic, supply chain disruption and commodity and energy inflation, he said Tesco was used to dealing with rising costs by finding savings elsewhere.
Finance chief Imran Nawaz said Tesco’s “Save to Invest” programme was on track to deliver 500 million pounds of efficiency savings in its year to February 2025, having delivered 640 million pounds in 2023/24.
“As we look ahead it’s clear it’s going to be another year where we’ll need to do a stellar job,” Nawaz said, singling out savings from better buying by Tesco’s procurement organisation, in logistics, in freight, and in cutting waste.
Sainsbury’s, facing an additional 140 million pounds national insurance headwind, is similarly targeting 1 billion pounds of cost savings by March 2027.
Clothing and food retailer M&S, facing 120 million pounds of extra wage costs, said it aimed to pass on “as little as possible” to consumers.
One of the biggest names on the British high street, the 141-year-old retailer is in the middle of a successful turnaround programme and believes it can continue to grind out further savings, modernising its distribution and supply chain.
“My summary is: big job, but lots in our control and we’ve got to be ruthlessly focused on costs in these next 12 months,” CEO Stuart Machin said.
“We talk a lot about volume growth, because the more we sell, the more that offsets some of these cost pressures.”
Ian Lance, fund manager at Redwheel, one of M&S’s biggest investors, said the firm was likely to be able to weather the cost challenges better than most. “They have an exceptionally capable management team and a product offering which is clearly resonating with consumers for its quality and value,” he said.
But for many smaller players raising prices is the only option.
A British Chambers of Commerce survey of 4,800 businesses, mostly with fewer than 250 staff, found 55% planned price increases – potentially hampering the fight to contain inflation and grow the economy.
And for some, more drastic action may be required.
British discount retailer Shoe Zone has said the additional costs of the budget meant some stores had become unviable and would be closed.
($1 = 0.8149 pounds)
(Reuters) – The Federal Deposit Insurance Corporation gave a fresh deadline of Feb. 10 to BlackRock (NYSE:) to resolve an issue regarding oversight into the firm’s stock in banks, Bloomberg News reported on Sunday, citing three people with knowledge of the matter.
By Steven Scheer
JERUSALEM (Reuters) -Israel plans to use tax revenue it collects on behalf of the Palestinian Authority to pay the PA’s nearly 2 billion ($544 million) debt to state-run Israel Electric Co (IEC), Finance Minister Bezalel Smotrich said on Sunday.
Israel collects tax on goods that pass through Israel into the occupied West Bank on behalf of the PA and transfers the revenue to Ramallah under a longstanding arrangement between the two sides.
Since the Hamas-led attack on Israel on Oct. 7, 2023, triggered the war in Gaza, Smotrich has withheld sums totalling 800 million shekels earmarked for administration expenses in Gaza.
Those frozen funds are held in Norway and, he said at Sunday’s cabinet meeting, would instead be used to pay debt owed to the IEC of 1.9 billion shekels.
“The procedure was implemented after several anti-Israeli actions and included Norway’s unilateral recognition of a Palestinian state,” Smotrich told cabinet ministers.
“The PA’s debt to IEC resulted in high loans and interest rates, as well as damage to IEC’s credit, which were ultimately rolled over to the citizens of Israel.”
The Palestinian Finance Ministry said it had agreed for Norway to release a portion of funds from an account held since last January with 1.5 billion shekels, calling money in the account “a punitive measure linked to the government’s financial support for Gaza”.
The ministry said as part of the deal, 767 million shekels of the Norwegian-held funds will pay Israeli fuel companies for weekly fuel purchases over the coming months. A similar amount will be used to settle electricity-related debts owed by Palestinian distribution companies to IEC.
Smotrich has been opposed to sending funds to the PA, which uses the money to pay public sector wages. He accuses the PA of supporting the Oct. 7 attack in Israel led by the Islamist movement Hamas, which controlled Gaza. The PA is currently paying 50-60% of salaries.
Israel also deducts funds equal to the total amount of so-called martyr payments, which the PA pays to families of militants and civilians killed or imprisoned by Israeli authorities.
The Palestinian finance ministry said 2.1 billion shekels remain withheld by Israel, bringing the total withheld funds to over 3.6 billion shekels as of 2024.
Israel, it said, began deducting an average of 275 million shekels monthly from its tax revenues in October 2023, equivalent to the government’s monthly allocations for Gaza.
“This has exacerbated the financial crisis, as the government continues to transfer these allocations directly to the accounts of public servants in Gaza,” the ministry said.
It added it was working with international partners to secure the release of these funds as soon as possible.
($1 = 3.6763 shekels)
BUCHAREST (Reuters) – Tens of thousands of Romanians angered by the cancellation of a presidential election marched through Bucharest on Sunday to demand that the ballot should go ahead and that outgoing centrist President Klaus Iohannis should resign.
In a move that polarised voters, Romania’s top court voided the presidential election on Dec. 6, two days before the second round.
The cancellation came after state documents showed frontrunner Calin Georgescu, a critic of NATO, had benefited from an unfair social media campaign likely to have been orchestrated by Russia, accusations Moscow has denied.
The court ordered that the election be re-run in its entirety. The pro-European coalition government has yet to approve a calendar for the election, although party leaders agreed to hold the two rounds on May 4 and May 18.
Iohannis, whose term expired on Dec. 21, will stay on until his successor is elected.
On Sunday, tens of thousands of protesters, including left-wingers and those angered by the way the way the election was cancelled, joined the protest organised by the opposition hard-right Alliance for Uniting Romanians (AUR), Romania’s second-largest party.
“We ask for a return to democracy by resuming the election with the second round,” AUR leader George Simion told reporters.
Organizers said 100,000 people were at the protest, but riot police along the march estimated the numbers at around 20,000. Protesters waved flags and shouted “Freedom” and “Bring back the second round.”
“Our right to vote was broken,” said Bogdan Danila, a 43-year-old truck driver. “In addition, Iohannis was in power for ten years and did nothing for the people, while parties betrayed us, they are all corrupt. We want something else.”
Some protesters carried portraits of Georgescu or Christian Orthodox icons while street vendors sold flags and vuvuzelas.
“Authorities must say why they cancelled the election, we want to see the evidence,” said Cornelia, 57, an economist wrapped in a Romanian flag who declined to give her last name.
“At this rate we won’t be voting anymore, they will impose a leader like in the old days.”
It remains unclear whether Georgescu, who opposes Romanian support for Ukraine against Russia’s invasion, will be allowed to run for president again.
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