Business, Innovation and Skills CommitteeWritten evidence submitted by Morrisons

About Morrisons

Morrisons is the UK’s fourth biggest food retailer, with over 490 stores in the UK, and one in Gibraltar. We have 129,000 colleagues and serve around 11 million customers every week. We are also a major food manufacturer, running our own food processing sites and three abattoirs. This sets Morrisons apart from other UK supermarkets and gives us unrivalled control over our supply chain.

We support the submission made by the British Retail Consortium (BRC) and therefore confine our response to three key areas: the value of retail; the skills needed for a successful retail sector; and the regulations and costs affecting the sector.

1. The Value of Retail

1.1 The retail industry makes a significant contribution to the UK and we welcome the opportunity to present our role in this.

1.2 From modest beginnings in 1899 as a market stall in Bradford, Morrisons has grown to become the UK’s fourth largest supermarket. This growth is reflected in our tax contribution. Last year we paid over £650 million in tax, spread across taxes on profit, taxes on property, employment taxes, indirect taxes, and environmental taxes. Our total tax contribution (taxes borne and taxes collected) was just short of £1 billion. This is clearly a significant contribution to the UK Exchequer.

1.3 As a British company through and through, we invest the vast majority of our profits back into this country. Our store building programme and investment in manufacturing pumps tens of millions of pounds into local economies, and can help to regenerate areas that are often in desperate need of investment.

1.4 In fact, most of our stores are in town centre locations. Surveys we have undertaken indicate that 60% of shoppers frequently combine visits to Morrisons with other activity on the high street (such as shopping for other food and non food items, and visiting the post office).1 Contrary to the views of some, the presence of a supermarket in a town can actually benefit, rather than harm, independent traders. This is borne out by research we conducted in 2011, which showed that 78% of local traders believe we have had a positive or neutral impact on their business.2

1.5 We are also investing heavily in our people. Morrisons employs 129,000 colleagues across retail, logistics, manufacturing and head office. Every colleague, whatever his or her ambitions, has an opportunity to progress and gain skills while earning above the minimum wage—often considerably above. As we will come on to explain, we are developing the skills of our workforce through apprenticeships and other forms of on-the-job training. This is good for our business, good for the individual and good for society.

2. The Skills needed for a Successful Retail Sector

2.1 The retail industry is ultimately about serving the customer and the qualities we look for in employees reflect this. For example, good time-keeping, communication skills, work ethic and personal presentation are all important. By virtue of long periods of unemployment, these are sometimes lacking in candidates who apply for jobs with us. Therefore we often invest in pre-employment training to help get people ‘work ready’. As a result of this commitment, more than 50% of our colleagues in stores recently opened were previously unemployed. We provide similar opportunities elsewhere in the business, such as our Willow Green distribution centre in Bridgwater, which opened in 2011.

2.2 Above all we look for potential—we hire for attitude, and train for skill. And we develop this by offering all colleagues practical, on-the-job training to help build their knowledge, skills and confidence. This includes core functional skills (including literacy and numeracy) as well as opportunities to embark upon an apprenticeship in a range of disciplines. These reflect the breadth of our business, from customer service and craft skills, to vehicle maintenance and multi-skilled engineering.

2.3 To date over 110,000 Morrisons colleagues have completed a QCF/SVQ Level 2 qualification in either retail skills or customer service (equivalent to 5 GCSEs at grade C or above). Almost a third of these colleagues left school without a single qualification. So the training we are offering is repairing gaps in knowledge left by the education system and building confidence, as well as setting colleagues on the first step towards the fulfilment of career goals.

2.4 In addition, thousands of our colleagues have taken the next step by training as an apprentice, with 11,000 Morrisons colleagues graduating in 2012/13. Our retail and customer service schemes help our people build their career from any in-store role, while our butchery and bakery programmes teach professional craft skills which are central to our unique ‘Market Street’ proposition.

2.5 As a retailer which operates its own manufacturing and logistics divisions, our needs are diverse, and we have tailored training programmes in place to equip colleagues with the skills required. In logistics for example, our three year Vehicle Maintenance Unit apprenticeship ensures that all our sites have the technicians and mechanics they need to keep us rolling on the road and in the warehouse. And our four-year Multi-Skilled Engineer apprenticeship provides the expert maintenance technicians our manufacturing division needs to keep production lines working and equipment serviced.

3. The Regulations and Costs Affecting the Sector

3.1 As set out in paragraph 1.2, the tax burden we face is considerable. Indeed, among the FTSE 100, only the banking sector and oil and gas sector contribute more in tax than the retail sector.3 We are happy to pay our fair share of tax to help fund the services on which we all depend, and to do so in a transparent way. But as one of the few drivers of growth in today’s economy, the Government should be looking to deliver greater certainty for the retail sector in the tax system as a way to promote further growth and investment.

3.2 As set out in the BRC submission, costs for the property-intensive retail sector have continued to grow, despite welcome reductions in Corporation Tax. Steep rises in business rates (which now exceed our Corporation Tax liability), and the lack of certainty in the rate-setting mechanism, are damaging confidence and weighing heavily on investment decisions.

3.3 Although outside the scope of this Committee, the Public Health Levy in Scotland, which is adding £7.4 million to our annual rates bill north of the border, is a disincentive to open new stores. Clearly, government has to make a very careful judgement over the level at which business rates and other taxes become counterproductive, deterring substantial capital investment and depriving local economies of the tens of millions of pounds that the construction of a new store (or other site) can bring.

3.4 To give the retail sector greater clarity and confidence to invest, we support a business rates freeze and reform to the rate-setting mechanism. Moving to a CPI-based escalator using a longer run average, rather than a single month’s RPI snapshot, is one way of achieving this. In the SME retail sector, business rate liabilities now frequently outstrip the cost of rent, which cannot be right.

3.5 The Government has made progress on regulation, but there is scope to go further and faster. For example, while the concept of ‘one-in-two-out’ is welcome, it would be much more meaningful if it was sector based (so the sector being impacted by the ‘in’ is the same as the sector advantaged by the ‘out’). Instead, due to the absence of any such link, we have a situation where the Groceries Code Adjudicator (impacting retailers) is the ‘in’ and the Property Misdescriptions Act (advantaging property developers and estate agents) is the ‘out’.

3.6 The Red Tape Challenge is another step in the right direction and we applaud the Government for this innovative approach. However, the majority of regulations identified for simplification or removal relate to antiquated ‘Trading with the Enemy’ measures, while in other areas insufficient urgency is being shown. For example, the Government announced plans to remove the requirement for retailers to notify TV licensing of sales of new televisions in July 2011. However, this obligation is unlikely to be removed until July 2013, a delay which has cost retailers in the region of £3.8 million, based on government estimates.

We hope this submission is useful and would be happy to expand further on any of the points made.

7 May 2013