Shares in B&Q’s owner Kingfisher tumbled today when it became the latest major employer to warn on the impact of the increase of employer National Insurance rates saying the Budget announcement will increase costs by £31 million next year.
The Anglo-French retail and DIY giant, which also owns the Screwfix and TradePoint brands in the UK, and Castorama in France, said the impact of the hike in rates and lowering in the threshold will be be felt in the next financial year starting in January.
The new 15% rate and the £5,000 earnings threshold come into force in April so the £31 million figure only covers 10 months of Kingfisher’s next financial year. Kingfisher employs about 80,000 people in total of which around 34,000 are in the UK.
The company is facing a double whammy on social costs as changes proposed in the French government’s draft finance bill could add a further £14 million, creating a £45 million hit in total.
Kingfisher said it expected to be be able to offset some of this through “a range of additional mitigations, but at this stage expect to offset only part of this impact.”
The shares opened down almost 11%, or 31.7p, to 263.2p
The warning came as the CBI’s boss Rain Newton-Smith said that Rachel Reeves’s first Budget will hurt profits, leading to lower investment and growth in a speech at the employers’ organisation’s annual conference at Queen Elizabeth II Centre in central London.
A survey conducted by the CBI after the budget found that nearly two-thirds of firms thought the budget will damage UK investment with half of firms looking to reduce headcount as a result.
Kingfisher told investors today in a third quarter trading update: “Reflecting on the recent Autumn Budget in the UK, as we have effectively demonstrated in recent years, we expect to offset the impact of wage increases through structural cost reductions and productivity gains.”
The company also said that consumer confidence took a knock in both the UK and France as a result of uncertainty in the run up to their respective government Budgets.
CEO Thierry Garnier said: “Overall trading in the third quarter was resilient. Improved performance in August and September was offset by the impact of increased consumer uncertainty in the UK and France in October, related to government budgets in both countries.
“All our banners in the UK, France and Poland performed in line or ahead of their respective markets, with particularly strong market share gains at Screwfix. We continued to see improved volume trends in our core categories, supported by repairs, maintenance and existing home renovation. As expected, sales of our ‘big-ticket’ categories remained soft, although we are seeing early signs of improvement.”
Third quarter sales of £3.2 billion in the three months to end October were down 0.6%, or 1.1% lower in like for like terms. Full year pre-tax profit guidance has been tightened from a range of £510 million to £550 million to a range of £510 million to £540 million.
Richard Hunter, Head of Markets at interactive investor,said: “Areas remain where Kingfisher needs to get its own house in order, most notably an underperforming French operation which accounts for 30% of group sales.
“Over the period, like for like sales in France dropped by 4.3%, underneath which revenues at its long-suffering Castorama unit fell by 4.7%, where the pressure has been in evidence for some time. “
“Indeed, the group previously announced that the unit would now be simplified, and reported good progress in the restructure and modernisation of the store estate, while Kingfisher has also been trialling some of its more successful UK strategies abroad in an attempt to bolster sales.”
