Unexpected things are happening to shop-floor wages in retail land. Last week prosperous John Lewis was grumbling that it might have to restructure staff benefits, including the annual bonus, to pay for George Osborne’s “national living wage” of £7.20 an hour for over-25s from April. Now, travelling in the opposite direction, comes supposedly stricken Morrisons, which is lifting basic pay by 20% to £8.20 hour, a rate greater than the living wage as defined by campaigners.
There are a few subclauses to Morrisons’ improvement. A rate of time-and-a-half for Sunday shifts will be abolished, though affected staff will not be out of pocket as the new system is adopted. A variety of supplements, for butchers for example, are being reorganised into a single rate. And paid breaks will no longer exist.
Those riders shouldn’t deflect from the basic fact that Morrisons will be paying a lot more than most of its supermarket rivals. Usdaw, the union, calls it “a big step forward” and recommends members give a thumbs-up.
What’s going on? The first factor is specific to Morrisons. The new chief executive, David Potts, seems to be borrowing from the Archie Norman manual of how to revive a struggling supermarket chain. At Asda in the 1990s, Norman handed out share options to all, hoping to create a spirit of ownership. It worked, and those options paid out handsomely when Wal-Mart bought the business in 1999.
Share options wouldn’t work so well at today’s Morrisons. Nobody would seriously think it possible to achieve an Asda-style surge in the share price; that business was almost bust when Norman arrived in 1991. So Potts will have to rely on pay. At a cost of £40m, it looks a sound commercial bet.
The second factor is that the labour market is clearly tightening for shop workers, a welcome development. In fact, if you are on shop floor at Tesco and Sainsbury’s, you’d be asking your bosses why you can’t have parity with staff at Morrsions and Lidl. Why not, indeed?
Glencore should keep things simple
Glencore has been God’s gift to investment bankers ever since Ivan Glasenberg decided to inflict the mining-cum-trading house on the public market. There were fees for rounding up buyers for the overpriced stock market debut in 2011. There was $140m to share around in the merger with Xstrata in 2013. There have been fees for smaller deals, such as the $6bn purchase of agricultural outfit Viterra. And, a fortnight ago, there was a £1.6bn placing.
But here comes Citigroup, recipient of some of those fees, with a fresh angle. “We believe that in the event the equity market continues to express its unwillingness to value the business fairly, the company management should take the company private,” say the investment bank’s analysts.
One has to admire the chutzpah, especially the final flourish that, once Glencore has been restructured in private, there could be “a potential flotation of the industrial business occurring further down the track”. Maybe that mining business could be called Xstrata and the whirligig could start all over again.
Come on, this buyout idea is for the birds. Those of us obliged to own a slice of Glencore via our pension schemes dearly wish Glasenberg had stayed private all along, but the last thing this over-borrowed company needs now is another layer of buyout debt.
One should never underestimate Glasenberg’s appetite for financial adventure, of course, but, with the shares sitting at 80p v the float price of 530p, one would hope $1m-a-year chairman Tony Hayward is telling the great trader to keep things simple.
That means flogging a few assets at half-decent prices to get borrowings under control. Citi, more soberly, suggests the agricultural marketing division could fetch $10.5bn – that would be a start.
At least BHP Billiton is in the disclosure game
Other miners have other things to do. BHP Billiton has published an analysis of how its business will perform when, or if, policymakers get serious about measures to combat global warming. Its timing proved good: in the evening Mark Carney, governor of the Bank of England, was on the same subject, calling for better information on the carbon intensities of corporate assets.
It’s hard to know if BHP’s document would satisfy Carney’s criteria. Probably not: more hard data, and fewer comforting words to shareholders on the outlook for profits, may be required. But at least BHP is in the disclosure game. BP and Shell have been persuaded by campaigners to issue their own studies next year. Standardised carbon reporting should be the norm.
