Will a higher minimum wage kill Britain’s shops?

Black Friday: The UK backlash

Napoleon once declared Britain to be a “nation of shopkeepers.” Two centuries later, that image is fading fast.

The U.K. retail industry says it could lose as many as 900,000 jobs, or almost a third of its workers, by 2025.

A higher minimum wage and advances in technology are to blame, the British Retail Consortium said on Monday.

The sector was hit hard by the global financial crisis, as consumer confidence and real wages plummeted. Some retailers have never recovered — there are now roughly 270,000 shops in the U.K., 40,000 fewer than in 2006.

And as many as 74,000 stores are at risk of shutting down within a few years as rising labor costs make it harder for them to stand up to online competitors. Around 15% of retail sales in the U.K. are now online, the BRC said.

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Britain’s new national “living wage” will come into force in April, and some retailers are dreading the effect it will have. The minimum wage for workers aged over 25 will rise to £7.20 ($10) an hour from £6.50 ($9).

The BRC says it supports the principle of paying workers more, but warns that the impact on jobs in the industry has been underestimated. It estimates the hike will add about £3 billion ($4.2 billion) a year to retailers costs.

Supporters of the higher minimum wage say it will boost spending, giving a lift to the economy.

Shops are also feeling the full force of rapid technological change. The BRC estimates that retail jobs have a 60% chance of being replaced by a machine.

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Three million people work in Britain’s retail sector, making it the country’s largest private employer. About one in three retail workers is under the age of 25.

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