Up to 2,500 jobs in core super market supply chains could be at risk in the wake of the proposed merger of Sainsbury’s and Asda, analysis by the New Economics Foundation (NEF) has found.

Sainsbury’s have reportedly claimed that the merger could lead to lower prices of up to 10%for consumers. Direct job losses and store closures have been ruled out, but it has been reported that lower consumer prices will be met at least in part through negotiating lower prices with suppliers.

Following these reports, analysts at NEF have looked at the potential impact on jobs in the supply chain of major supermarkets, in the event that either all or some of a 10% price cut is passed on to core suppliers of food products and logistical services. Our analysis shows that a 5% cut in output for these suppliers could lead to a loss of more than1,200 jobs, while a 10% cut could lead to a loss of up to 2,500 jobs.

The total job losses related to a cut in prices for supermarket suppliers could be higher in reality as these estimates do not cover the total supply chain, or the further impact of lost demand in local economies from reduced spending by companies, employees and their families, which could lead to further business closures and job losses outside of supermarket supply chains.

Alfie Stirling, Head of Economic at the New Economics Foundation, said:

If the proposed merger between Sainsbury’s and Asda is allowed to proceed, we are likely to see a classic case of monopoly like power in a market where things are already heavily stacked towards the big guys’.

This is part of a broader picture, where time and again UK capitalism shows itself to be geared against small business in a way rarely seen in the rest of Western Europe. Small and medium sized firms make up more than 99% of all UK companies, 60% of employment and nearly half of turnover, yet they are repeatedly required to play second fiddle. “

Notes to Editors

Figures for employment are based on full-time equivalent jobs and have been rounded to the nearest 100. Supply chain effects are based on NEF analysis of the latest ONS multipliers derived from input-output supply and use tables’. Estimates of job losses down the supply chain are based on the assumption that supply chain output will fall due to a drop in supermarket retail prices being passed through to output prices for suppliers. As with all multipliers, these estimates are based on averages and will be subject to a margin of error. Further, these estimates do not take account of the fact that some workers and suppliers may find business elsewhere, and that some affected suppliers will be located outside of the UK. They therefore represent estimates of gross job losses, not net.

We define core’ suppliers as those involved in the production or wholesale of food articles, as well as services in transportation, warehousing and advertisement – these have been identified on the basis of Standard Industrial Classification codes. Estimates for intermediate consumption of these goods and services are based on 2015 supply and use tables and weighted by an estimate for the proportion of final retail sales made at Asda and Sainsbury’s combined. Figures for intermediate consumption have been uprated to 2018 prices using the GDP deflator. Given nominal GDP growth has exceeded inflation since 2015, this is likely to lead to an underestimate of true intermediate consumption today, and therefore an underestimate of the gross number of jobs at risk.