THERE has been a £6 billion explosion in the pensions scheme deficit ‘black holes’ of Britain’s major retailers since the beginning of the year, it was claimed yesterday.
The multi-billion pension liabilities at Tesco, Sainsbury’s, Marks and Spencer and the other major retailers have grown by 30% since the start of the year, said Charles Cowling, managing director of JLT Employee Benefits insurance and pensions group.
The deficit accelerated after the slump in sterling which followed the EU referendum result, he warned, and then is expected to have ballooned following the Bank of England’s move to slash interest rates earlier this month.
Cowling said: ‘If the retail sector has been affected on average similarly to the rest of the FTSE 350 by events in 2016 this means that deficits in retail pension schemes will have increased by around £6bn to date in 2016.’
He warned of the vulnerability of ‘pension schemes that have little or no protection against movements in bond yields’. The last 58 British Homes Stores branches are closing their doors for the final time this week, leaving 11,000 workers sacked and 22,000 BHS pensioners threatened by an estimated £700m BHS pensions deficit
Hundreds of thousands of other retail workers will be wondering if their pensions are set to go the same way.
Tesco’s last annual report revealed a huge £3.2bn pensions deficit, which will have increasingly widened this year, especially following the impact of the interest rate cut on bond yields.
Meanwhile, Bank of England Chief Economist Andrew Haldane described the August 4th cut in interest rates as merely a ‘short-term balm’ that can’t fully insulate the UK from the long-term impacts of the vote to leave the European Union.
He condemned the Brexit vote, claiming it has ‘blown up a dust cloud of economic uncertainty, making it harder for companies to plan, with potentially adverse implications for future investment and jobs’.
He warned: ‘The UK economy faces structural problems including stagnant wages for more than half the country’s households and growing wealth disparity with the asset-rich receiving most of the benefits.’
The Brexit vote was also to blame for tipping the UK economy into a ‘mild recession’, according to economists in a Reuters poll, most of whom warned that the Bank of England would chop interest rates again in November.
‘The recession will largely be driven by sharp falls in business investment over the coming quarters,’ said Samuel Tombs at Pantheon Macroeconomics.
