Morrisons cuts sick pay for non-jabbed workers after ‘biblical’ pandemic costs

Pay changes part of plans to mitigate supply chain crisis as company prepares to be auctioned off amid profit slump

Morrisons is cutting sick pay for unvaccinated workers who need to self-isolate, as the UK’s fourth largest supermarket tries to pare back the “biblical costs” of the pandemic after a slump in profits.

David Potts, the chief executive of the Bradford-based group, said the pay changes were among a number of strategies Morrisons was using to mitigate cost rises from shortages of HGV drivers, supply chain disruption, and the growing wholesale prices of commodities, including beef and wheat-based products such as bread.

In a financial update to the City on Thursday, Morrisons acknowledged it was facing “sustained supply chain cost increases” outside its control, and predicted that would mean price rises for shoppers across the retail industry in the coming months.

Morrisons, which is set to be auctioned off for at least £7bn next month, said pretax profit before some one-off items fell by more than a third to £105m in the six months to 1 August. One-off costs included £5m in fees related to the prospective takeover.

Profits were also held back by £41m of direct Covid-19 costs plus £80m less earned from cafes, fuel and food-to-go, as habits changed and government restrictions were imposed during the pandemic.

However, the group said it expected to exploit rising sales in the second half of its financial year. It signalled that it was on track to make profits of more than £431m for the full year – the level it would have achieved in 2020 had it not given back £230m in unneeded government aid. Morrisons said it was not budgeting for many extra Covid-19 costs, and that it expected profits in its online and wholesale operations to rise.

Potts said Morrisons was tackling the “biblical costs of managing Covid” after being on the “front foot” in helping workers stay safe during the pandemic. “We are normalising some of those policies,” he said, citing cutting sick pay for unvaccinated workers who needed to self-isolate as a good example.

He said the move was also intended to encourage workers to get themselves vaccinated.

One member of staff who contacted the Guardian said: “It feels almost like the company is coercing people into getting the jab.”

Potts said: “Seventy-one per cent of folk already have [had the vaccine] and we are all in this together.”

Revenues across the group rose by 3.7% to £9bn during the half year, helped by a 48% like-for-like increase in online sales, providing a boost as it prepares to go private.

Morrisons is the subject of two separate bids by US private equity investors who believe the UK’s fourth-largest supermarket could be more valuable as a private company.

The grocer said on Wednesday it was in talks with the two suitors – Clayton, Dubilier & Rice and Fortress – as well as the UK’s Takeover Panel, which regulates acquisition activity – to begin an auction procedure to settle who takes over the chain.

Last month, the Morrisons board recommended that shareholders back an offer by CD&R that would value the supermarket chain at £7bn (or £9.7bn including debt).

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

However, it is thought that the rival private equity firm Fortress, owned by the Japanese investment bank SoftBank, which has had its offers of £6.5bn and £6.7bn trumped by CD&R, could still come out with an improved bid.

Potts said the latest trading figures showed that Morrisons’s management team had not been distracted by the bid talks. He said plans for expansion continued and the group’s tie-up with Amazon, through which Morrisons now sells online goods from 69 of its stores, would continue.

The retail veteran said had not considered whether he would stay on if the company was taken private.

“Under any ownership model, I believe Morrisons has a bright future as Britain’s biggest single customer to farming, and single biggest food maker, quite separate to the supermarket business,” he said. He added that Morrisons would remain “important British business” even if its new owners were American-based funds.


Jasper Jolly, Sarah Butler and Mark Sweney

The GuardianTramp

Related Content

Article image
Morrisons’ new owner has plenty of wriggle room in takeover terms | Nils Pratley
CD&R has made fine-sounding pledges but they don’t stop this being yet another debt-fuelled buyout

Nils Pratley

04, Oct, 2021 @6:16 PM

Article image
Fortress-led group increases offer for Morrisons to £6.7bn
Majestic Wine owner attempts to fend off rival suitor and win over reluctant shareholders

Sarah Butler

06, Aug, 2021 @4:38 PM

Article image
Bankers and advisers would net £275m from Morrisons takeover
Documents reveal fees US private equity firm Fortress proposes for financing deal and for broking and legal advice

Jasper Jolly

22, Jul, 2021 @8:57 AM

Article image
Morrisons writes to reassure anxious UK farmers over US takeover
CEO’s letter to 3,000 suppliers reaffirms grocer’s unique dealings with British agriculture

Joanna Partridge

11, Jul, 2021 @3:56 PM

Article image
Morrisons shares expected to surge as private equity groups circle
At least three groups thought to be looking at grocer, which has accepted a takeover bid from Fortress

Miles Brignall

04, Jul, 2021 @4:16 PM

Article image
Who are the American investors making a move on Morrisons?
£6.3bn bid is led by Majestic Wine controller Fortress, with junior partner Koch Industries

Sarah Butler

03, Jul, 2021 @1:56 PM

Article image
Legal & General warns over private equity interest in Morrisons
Comments seem critical of takeover practices commonly associated with sector

Jasper Jolly and Kalyeena Makortoff

05, Jul, 2021 @5:11 PM

Article image
Morrisons pension trustees raise concerns over £7bn takeover plan
Trustees say more protection should be put in place before shareholders vote on private equity deal

Zoe Wood

24, Aug, 2021 @6:36 PM

Article image
Labour urges government to protect Morrisons in potential private equity takeover
Opposition MPs say ministers must stop company falling victim to asset-stripping as share price rises

Rob Davies

22, Jun, 2021 @6:23 PM

Article image
Apollo in talks to join Fortress-led £6.3bn takeover of Morrisons
US private equity firm’s move cuts chance of takeover battle for UK supermarket group

Julia Kollewe

20, Jul, 2021 @8:05 AM