Primark owner doubles down on automation after Budget tax rises

George Weston, CEO of Primark owner Associated British Foods (ABF), told Drapers: “We employ about 40,000 people in the UK so the increase in employers’ National Insurance contribution is a very big number indeed.”

Last week (30 October), chancellor Rachel Reeves increased National Insurance contributions by employers from 13.8% to 15% and lowered the earnings threshold at which companies start paying from £9,100 to £5,000.

The move will raise £25bn per year, among which £2.3bn is estimated to come from retail businesses, according to the British Retail Consortium.

When asked about how Primark will mitigate the additional costs, Weston said: “We are very reluctant to move our prices again so we will start off by looking for cost savings, things like self-checkout units [which can] save us labour in store.

“We are also automating our warehouses across Primark. I think we will be employing fewer people as a consequence of the automation in a year's time.”

Self-service checkouts form parts of the retailer’s store refurbishment programme globally. Across its 451 stores in 17 markets, around 100 locations have self-checkouts, which is expected to rise to 170-180 by the end of the current financial year, Weston added.

It comes as Primark reported a 6% rise in revenue to £9.4bn for the 52 weeks to 14 September, which it attributed to improvements in its store experience and digital engagement.

Operating profit rose 53% to £1.1bn during the period, driven by lower material costs and reduced realised freight costs, as well as the annualisation of price increases in the prior year.

Looking ahead, Weston said: “The cost savings themselves will not offset the national insurance increases and the minimum wage increases in the UK. I think we have to see sales growth.”

With minimum wage up 6.7% to £12.21 an hour for those aged over 21 from next April, consumers could have more disposable income.

“We hope to see the increases in minimum wage leading to the least affluent with a bit of money to spend with us," said Weston.

“We do a very good job for families who are not flush with money so maybe if they are feeling a bit less hard-pressed, we will benefit from that.”