(Bloomberg) —
Britain’s biggest grocers are increasing pay to retain workers as rising inflation causes the worst cost-of-living crisis in decades.
Tesco Plc, the country’s largest grocer, said Thursday that it’s lifting wages by almost 6%. Smaller rival J Sainsbury Plc is telling staff on Friday that from May all workers will receive the so-called real living wage — currently 11.05 pounds ($14.43) in London and slightly lower outside the U.K. capital.
The moves show how British companies are being forced to respond to the cost-of-living crisis, which is pinching consumer budgets as the prices of fuel, energy and food soar. U.K. supermarket employees are among those worst-affected, with an increasing number using food banks, according to the Independent Food Aid Network.
Other companies across Britain are also facing demands for higher pay. Telecommunications company BT Group Plc on Thursday announced a 1,500-pound increase for its workers, calling it the biggest award in two decades. However, the Communications Workers Union, which represents nearly half of its staff, said the offer was “insulting” at a time when inflation is surging.
The Bank of England says higher wages threaten to cause an upward spiral in prices. Policy makers have boosted interest rates three times since December and are expected to act again as early as next month to clamp down on inflationary forces.
Consumer prices rose 6.2% in February, and the central bank has warned inflation could hit double digits by the end of the year, fueled by a surge in energy, food and clothing prices. Pay growth eased during the coronavirus lockdowns in 2020 and then surged as much as 8.8% in the middle of last year as the economy reopened and companies struggled to find workers.
Wage increases since then have settled down to a more moderate pace of under 5%, though Britain’s low productivity levels mean even that level may be more inflationary than in years past. The BOE’s target is to keep inflation to 2%.
British businesses facing increase requests have to balance those with the need to invest in the business at a time when costs are soaring and supply-chain problems and geopolitical concerns are weighing on sentiment.
Tesco is increasing the hourly rate for shop and warehouse workers to 10.10 pounds from July 24, with staff in London receiving 10.78 an hour. Truck drivers, who are in strong demand as online grocer ordering takes off, will receive 11 pounds hourly. The company said that while it normally agrees to two-year deals with union workers, it will review wages again next year because of the uncertainty in the economy.
Sainsbury’s enhanced pay will make it the highest payer in the U.K. industry and the first grocer to provide the real living wage to supermarket employees, who were designated as key workers by the U.K. government during the pandemic.
The real living wage is the minimum hourly rate necessary for workers to afford housing, food and other basic needs, according to the Living Wage Foundation. Sainsbury workers in central London were already receiving the 11.05-pound hourly rate; those in outer parts of the capital will now get it as well, while those in other regions of the U.K. will receive 10 pounds an hour — 10 pence above the real living wage for those regions.
Sainsbury was already facing a demand from more than 100 shareholders including HSBC Holdings Plc to pay the higher living wage to all its employees. The resolution was to be voted on at the annual meeting later this year.
BOE Governor Andrew Bailey in February urged workers to hold off on inflation-busting pay demands, saying policy makers would have to respond with higher borrowing costs. That drew jeers from union and research groups concerned that wages are failing to keep up with rising prices, delivering the biggest squeeze on living standards since the 1970s.
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