POLITICS
30/04/2018 16:04 BST | Updated 30/04/2018 16:15 BST

Ministers Should Intervene In £12bn Asda-Sainsbury's Merger If Northern Jobs To Suffer – Labour

Asda has a head office in Leeds and a food and distribution network in the north west.

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Shadow Business Secretary Rebecca Long-Bailey said statutory merger laws should be strengthened. 

Ministers should have the power to intervene in the Asda-Sainsbury’s merger if the deal disproportionately hits the north, Rebecca Long-Bailey has said. 

Labour’s Shadow Business Secretary said MPs should have a statutory right to intervene in a business deal when deprived communities heavily lose out. 

As it stands, a merger cannot be halted unless it puts at risk national security, media plurality or the UK’s financial security - but Long Bailey says the public interest test for interventions should be broadened to include when the economy is hit. 

It came as Sainsbury’s confirmed on Monday that it has agreed terms for an eye-popping £12bn merger with Walmart-owned Asda as one of the biggest retail deals in UK history began to take shape. 

The competition watchdog, the Competition and Markets Authority (CMA), is expected to scrutinise the deal as the duo are projected to have revenues of £51bn and a network of 2,800 Sainsbury’s, Asda and Argos stores.

Fears were mounting the deal could place at risk jobs and local economies, however, with the fiscal analysis firm GlobalData estimating at least 75 Asda stores would be forced to shut their doors. The CM may insist a number of stores close down to ensure there is no breach of competition law. 

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Business Secretary Greg Clark should intervene, says Long-Bailey 

Labour has also voiced concern that the north could be hardest-hit, with Asda - whose backer Walmart is expected to hold a much smaller stake - having stores, offices, food production and distribution networks centred in the region. 

Long-Bailey told HuffPost UK the law should be strengthened to ensure ministers can intervene if deprived parts of the north are hollowed out by the deal.  

“With massive mergers like this, there is no right to recall and no right to intervene - and that is extremely worrying,” she said. 

“We need the ability to change statutory merger laws - and this is another critical and key example of that. 

“If [the merger] does show a regional impact on certain offices, stores and staff functions, the secretary of state should be able to intervene. 

“This deal will have a significant impact for those working at Asda and could have a detrimental effect on our regions and nations - and this is not something that the CMA will be looking only at the impact on competition. 

“We really need to consider the scope of merger investigations.

“It is not just the [Asda] head office in Leeds in this case, a lot of the food and manufacturing bases which could be adversely affected are in the North and the North West, and they have all been sent into a state of panic and disarray. 

“This merger has the potential to devastate communities.” 

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The competition watchdog is being urged to investigate the possible merger of the two supermarket retailers

Long-Bailey has also hit out at the risk to suppliers, manufacturers and consumer choice as part of deal. 

“This unrivalled power also poses immense risk to suppliers with unprecedented bargaining power to drive suppliers prices and payment terms down which could cause instability and damage to the food and grocery manufacturing industry,” she said. 

The merger between the UK’s number two and three supermarkets will aim to generate £500m in cost savings, though Sainsbury’s has insisted there are no planned store closures.

Asda, whose backer Walmart will retain a minor role in the new company, employs around 2,000 people at its head office in Leeds. Its George clothing brand has its base in Leicester. 

Sainsbury’s, meanwhile, has most of its stores and infrastructure in the south and south-east. Its head office is in London’s Holborn and the supermarket giant retains a back office presence in Birmingham and Manchester. 

Gary Carter, national organiser for the GMB union, said exacerbation of the north-south economic divide “needs to be taken into consideration”. 

He added: “You have the business headlines. We know about the share prices, but what about the impact on communities, what about the impact on jobs. 

Mike Coupe CEO of J Sainsbury Judith McKenna President and CEO of Walmart International and Roger Burnley President and CEO of Asda
Mike Coupe, CEO of J Sainsbury, Judith McKenna, President and CEO of Walmart International and Roger Burnley, President and CEO of Asda

“We have Asda which is a strong, North-based business and Sainsbury’s which is stronger in the South and we know that jobs are always lost in mergers.”  

The combined supermarket is thought to be good news for consumers, with prices forecast to drop around 10% on products customers buy regularly.

Sainsbury’s chairman David Tyler said: “We believe that the combination of Sainsbury’s and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.

“As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy.”

GlobalData based its closure estimate on what the CMA may demand from the supermarkets in order the deal meets competition guidelines. 

Patrick O’Brien, retail research director, said: “While there are no plans to close any stores at this time, regulators will be looking to see how many Asda stores are in close proximity to Sainsbury’s stores.

“Seventy-five Asda stores have a Sainsbury’s (excluding Locals) in the same sector.

“We think these 75 stores would be the absolute minimum that the CMA will want disposed of.”

If the deal goes ahead, the combination will create a high street titan with a bigger share of the market than Tesco.

Latest figures show that Tesco has a 27.6% market share, while Sainsbury’s has 15.8% and Asda has 15.6%. Together, they would move ahead of Tesco, with 31.4% of the market.

The deal will see Asda owner Walmart hold 42% of the new business and receive £2.97 billion in cash, valuing Asda at £7.3bn. 

Sainsbury’s is valued at around £5.9bn.