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Soaring Minimum Wage Hurts Job Creation, Currys CEO Warns Labour
(Bloomberg) -- A new UK government should ensure that increases in the minimum wage don’t make hiring more workers prohibitively costly, according to Currys Plc Chief Executive Officer Alex Baldock.
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Baldock, in an interview, also called for a stable taxation policy and a continued openness to some overseas talent.
Curry’s, a home electronics retailer, became the subject of international takeover attention earlier this year. The company, which is listed on the London Stock Exchange and has sales of almost £10 billion ($12.7 billion), received an approach from US hedge fund Elliott Investment Management, as well as interest from Chinese e-commerce player JD.com Inc.
Baldock, 53. spoke to Bloomberg News as part of a series of interviews with CEOs ahead of the UK’s July 4 general election, in which business leaders diagnose the country’s problems and propose solutions.
Q: The Labour Party has talked about increasing pay via a “genuine living wage,” and making changes to the rights of workers — including scrapping probation periods for new employees. What will be the impact on businesses such as yours?
What we want to be is a sustainable job creator for the economy. We’re paying our front-line workers 29% more than we were three years ago. And we’re happy to do that. But there is a balance between mandated wage increases and the extent to which you can employ people. And I just hope that any future minimum wage increase takes better into account that there is undoubtedly a trade-off.
Probation gives both sides a chance to take a look at each other before both sides commit. Our business rests on an assisted sale, helping customers choose the right tech for them and the right solution, including services as well as the product. It’s quite a demanding job as well as a rewarding one. It’s not for everybody. So [probation] allows us to take chances on people, whether it’s people whose first job it is or people coming back into the workforce. And the more flexibility that we have the more chances you can take.
Everybody’s seen quite a lot of Rachel Reeves over the past 18 months. [Labour] appear to be genuinely interested in listening to what business has to say. They appear to genuinely believe that business can be a powerful engine of growth and jobs. I strongly believe that business can be a powerful force for good in society. And I think that there are the people at the top of the Labour Party who appear to reflect that. So that’s promising.
Q: After Christmas, you said consumers were cutting back on big-ticket items. What are you seeing now?
There’s been no top-line growth in the market at all. The tech market’s gone backwards every year for the past four years. Some observers will tell you that technology’s going to be the first in and the first out of any downturn being a discretionary big-ticket purchase. I’m cautiously optimistic about some of the signs that we’re seeing in the UK consumer at the moment.
Employment rates are relatively high, retained savings are pretty high for this stage of the cycle, consumer confidence is up and is now at a 22-month high, and there are even signs of life in the housing market. So if you wanted to take a slightly more optimistic view of where the UK consumer is headed, then you could. We’re sitting here quietly satisfied with the status of our current trading.
Q: How is your business impacted by Amazon, and how do you compete?
Amazon get a free ride on infrastructure funded by retailers who actually pay their fair share of tax.
However, in technology, the customer likes to shop through a mix of online and in stores. Sometimes they like the face-to-face expert, trusted advice on what is an expensive and confusing as well as exciting product. They like to have the product demonstrated to them. They like to see it for themselves and they like to sometimes take it home with them there, all of which speaks to stores. Sometimes they want the range and the transparency of price of an online experience. If you’ve got both, as we do, then you’re well equipped.
Q: Inflation hit the Bank of England’s 2% target in May. What are you seeing with your own input costs?
Broadly, yes, input cost inflation has come down. What we’re seeing this year is a spike in container cost inflation with what’s going on in the Red Sea. We’ve got longer-term contracts but that is an inflationary pressure.
The biggest inflationary impact on us is actually not the input supply cost, it’s consumer sentiment. And so everything else being equal, inflation going down to 2% will further improve consumers’ confidence and propensity to spend.
Q: Currys had an approach from Elliott earlier this year. Is this a symptom of valuations being low in the UK, and how do we fix it?
We can’t much influence 30 consecutive months of net outflows from UK equities. Nor can we on our own deal with unnecessary friction like stamp duty on share sales. There are certain things that any government could do to improve matters, whether it’s providing a stable and predictable environment for businesses to operate, whether it’s providing the skills, the infrastructure, the investment, the tax regime, the regulation, the policy, the planning, all of that. Providing the conditions in which businesses can thrive.
In recent years, investors have had some disappointments from being owners of Curry’s shares. What hasn’t been unhelpful is the fact that Elliott chose to make the bids that they did. Within 24 hours, both the board and eight of the top 10 shareholders had come out publicly and said that this doesn’t remotely do justice to the prospects of this company.
Q: Is there anything a new government could do to make life easier for UK-based companies?
Wild swings in currency, interest rates, policy and regulation are not terribly helpful, nor is a more general sense that the UK is a risky and difficult place to do business. So we’ve had a period of calm on that front. One US investor put it to me six months ago: The grownups appear to be back in charge on both sides of the aisle politically.
Skills is one area. We need access to talent. Some immigration control, by all means, but it can’t be a closed door.
The planning regime needs a little work. There are reasons to prefer living in the UK to China, but on the other hand, in the time we’ve been arguing about a third runway at Heathrow, China has built 44 airports larger than Heathrow.
--With assistance from Jennifer Creery.
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