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Sainsbury's/Asda price pledge threat to suppliers

As many as 2,500 supplier jobs may be at risk if the proposed Sainsbury’s/Asda merger goes ahead as planned, an economics thinktank has reported.

Research from the New Economics Foundation, detailed in The Times, claims that the suggested 10% price cut on everyday items may impact suppliers and logistics providers, leading to job losses.

The research suggested that if some of this 10% price cut were passed on to the providers, it would put jobs at risk.

The foundation stated: “Analysis shows that a 5% cut in output for these suppliers could lead to a loss of more than 1,200 jobs, while a 10% cut could lead to a loss of up to 2,500 jobs.”

The statistics did not break down suppliers by area of business such as clothing.

Alfie Stirling, head of economics at the New Economics Foundation, described the findings as a “classic case of monopoly-like power in a market where things are already heavily stacked towards the big guys”.

However, a spokesman for Sainsbury’s criticised the findings, saying: “A more resilient business, with lower prices and increased sales, will result in higher volumes for suppliers. The proposed combination would create opportunities for suppliers, as well as for customers, colleagues and shareholders.”

The proposed merger was announced last week when Sainsbury’s confirmed it had agreed terms with Asda owner Walmart to buy a majority stake in its supermarket rival. If the deal goes ahead, it will create one of the UK’s largest grocery and clothing groups with a combined revenue of £51bn.

Both supermarkets are significant players in the clothing market: Asda ranks fifth by value with 3.5% market share and Sainsbury’s 15th with 2.1%, Global Data shows.

Industry observers told Drapers last week that the merger would result in the “inevitable” consolidation of Tu’s and George’s supplier base.

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