Tesco boss says new workers’ rights laws must not hurt growth

The boss of Tesco has called on the UK government to work with business to ensure new legislation to improve workers rights also increases productivity and growth as the retailer revealed better-than-expected profits.

Ken Murphy, the chief executive of the UK’s biggest supermarket, said he was keen to use a planned consultation on the wide-ranging employment rights bill, announced by the government in the king’s speech in July, to “make sure that whatever the government decides to put forward has the intended consequence of stimulating productivity and growth and protecting workers at the same time”.

The bill, which is due to go before parliament next month, is expected to include measures such as ending “exploitative” zero-hours contracts , a better deal for new parents, day-one protection against unfair dismissal, and statutory sick pay from the first day of illness.

A poll by the TUC union found widespread support among business leaders for the changes. While bodies representing small businesses have expressed concerns about higher costs, several large employers, including the bakery chain Greggs, have said they are relaxed about the legislation as they already offer many of the benefits it enshrines.

Tesco said it was likely to make £2.9bn in profit this year, £100m more than previously expected, as shoppers bought more items than it predicted in the first half of the year. Profits rose 20% to £1.4bn as sales rose by 4% to £31.5bn in the six months to 24 August.

Murphy said Tesco’s sales had been bolstered by the Euro 2024 football championship and by putting a further 2,000 staff on the shop floor during the first half of the year while it made £260m in cost savings, partly by using technology to be more efficient.

The group also said it had gained market share from rivals by cutting prices on thousands of items and adding 100 more lines to its price-matching scheme against the discounter Aldi in the past year to take it to almost 800.

Murphy said Tesco was “preparing for a good Christmas” – the most important part of the trading year for retailers – and would have more goods for sale than last year as it was seeing a “relatively positive picture” in customer sentiment.

He said a slowdown in sales growth in the second quarter was caused by lower-than-expected inflation in the market. “We see customer sentiment improving ahead of Christmas, and we expect more customers to go for a special and fun-filled Christmas,” he said.

He said shoppers were showing “a willingness to spend a little bit more to treat themselves” – spending 15% more on Tesco’s Finest premium own-label range while continuing to keep a lid on budgets by swapping dining out for premium ready meals.

However, he added that the supermarket was acutely aware of the continued challenges customers were facing, given continuing cost-of-living pressures on households.

Tesco’s Whoosh fast-track grocery delivery service also increased sales by a fifth as startup rivals, including Getir , dropped out of the market. Sales of clothing are also up and Tesco plans to put its F&F own-label range back online for the first time in six years.

The supermarket is continuing to cut costs with plans to take out £240m in the second half by improving productivity using technology, such as AI that is helping tailor ranges to suit local areas. The company said the technology was enabling it to take on fewer staff to support growth rather than leading to job cuts.