Rishi Sunak, the chancellor, readily conceded last week that there would be a “dead weight” cost to his policy of offering firms a £1,000 bonus for every employee recalled from furlough and kept in employment until the end of next January. That weight is the waste of rewarding firms for doing what they would have done anyway as the economy reopens.
So it is good news, of a sort, for Sunak that some are too embarrassed to take the money. The fashion retailer Primark was first out of the blocks at the weekend. It didn’t need a financial incentive to get 30,000 furloughed staff back in the shops and warehouses, so it will decline the kind offer of £30m of public money. Well played.
Primark’s honourable stance, though, does also underline the shockingly poor design of Sunak’s “job retention bonus” scheme. Yes, in a few cases, a £1,000-per-employee incentive may change the financial calculation for an employer, but one suspects the numbers will be tiny.
Jim Harra, the chief executive of HMRC, grasped the point when he formally told the chancellor the scheme, with a theoretical maximum payout of £9.4bn, did not offer “value for money”. If it’s too awkward for the chancellor to plead with big companies to follow Primark’s example, someone should be put on the case. An energetic junior minister could save a billion or two here.
Move up-market and away from fast fashion only promising route
Another day, another clothing retailer facing reports of pay abuses in its supply chain in Leicester. This time it was Quiz promising a “full review” of auditing processes after cases were found of workers being offered £3-£4 an hour to make garments for the label.
Meanwhile, the mini-recovery in the share price of Boohoo, the retailer that sources 40% of its garments from Leicester, reversed. The shares fell 18%. Investors have understood that this affair will not go away quickly. Any doubt on that point was removed on Friday when Aberdeen Standard Investments called Boohoo’s board’s response to last week’s revelations “inadequate in scope, timeliness and gravity”.
As with Boohoo, the Times’ report about Quiz involved work being passed on to subcontractors, with visibility of the supply chain being lost (or not sufficiently sought). This is the aspect that deters some rival retailers. If you are truly committed to knowing every detail of where and how your clothes are manufactured, they say, Leicester’s textile industry is not the place for you. The location is seen as too risky – it’s too hard to gain 100% confidence in the quality operators.
Some Leicester refuseniks, though, also make a more cheerful point. If visibility and trust improved, they’re not averse to moving some manufacturing back to the UK. Price gains from off-shoring production are becoming harder to achieve; quick turnaround times and closeness to customers now have increasing competitive appeal for mid-market labels, not just the likes of Boohoo.
Rehabilitation of the reputation of the UK textiles industry is clearly not likely to happen quickly after the revelations of the past fortnight. But a move up-market, and away from fast fashion, looks the only promising route.