Next shareholders pressed at annual meeting on how company will ensure staff earn enough to have a good standard of living as fair pay drive begins

Speaking up in front of the besuited board of one of Britain’s biggest retailers, Father Michael Brown appeared nervous. “How will a great company like Next ensure those working for it earn enough to get by with a decent standard of living?” he asked.

The grey-haired priest’s politely delivered question at Next’s annual shareholder meeting, held in a small stuffy room at a hotel on the outskirts of Leicester on Thursday, was the first move in a campaign designed to raise the pressure on big retailers to improve pay for shopfloor staff.

Next stop is Ocado’s annual meeting on Friday where a representative of the Living Wage Foundation will hope to put a similar question to the online grocer’s board.

The campaign, backed by pressure groups Citizens UK and ShareAction, will see activists go to the annual meetings of at least 10 retailers.

Taxpayers spend £11bn to top up low wages paid by UK companies Read more

Meanwhile, a group of 15 institutional investors managing a collective £50bn of assets have signed a letter to major retailers including Tesco, Marks & Spencer, Sainsbury’s, Morrisons and Argos owner Home Retail Group, asking them to introduce the living wage – £9.15 an hour in London and £7.85 across the rest of the UK – in the next year.

“We wish to invest in socially sustainable companies that focus on long-term as well as short-term success. Significant evidence has accrued that the living wage helps to ensure a company’s continuing productivity whilst earning the loyalty of staff at all levels and external stakeholders,” the letter says.

While more than a thousand British companies, including a quarter of those listed on the FTSE 100, have agreed to pay staff the living wage, the only retailer to do so so far is Burberry. The luxury fashion label became accredited last month.

Citizens UK estimates that 5.2 million workers in Britain are paid so little they are entitled to £11bn of “in-work” benefits to top up their wages. It said just over £1bn of that taxpayers’ money goes to workers at Tesco, Asda, Sainsbury’s, Morrisons and Next.

Lisa Nathan, head of the living wage campaign at ShareAction, said retailers were under particular pressure because the sector accounted for 28% of people who earned less than the living wage.

The prominent profile of high street companies also means they risk a consumer backlash. Such pressure has already led to wage rises in the US, at retailers including Walmart, Gap and McDonald’s.

In the UK, an ICM poll conducted for Retail Week found almost half of consumers, 46%, would be put off shopping with a retailer if they knew it did not pay the living wage. High profile campaigns have led to worries that the image of the entire industry is being tarnished – with the outcry over the use of zero-hours contracts by companies including Sports Direct and over pay differences at Asda between mostly female shop workers and predominantly male warehouse staff.

Nathan said: “Everyone has an interaction with retailers and when you go shopping somewhere you want to know that people are earning a decent salary, not tax pounds.

“Momentum is starting to build across the big companies in the UK. Burberry’s move is a crack in the sector. They are at the higher end of the market but are a major British institution. Big retailers like to see themselves as creating good quality jobs and Burberry shows that the living wage can be part of that.”

Next is a fitting starting point for the latest campaign. The group has drawn criticism over pay since its chief executive Lord Wolfson, a Tory peer who last year earned £4.66m in cash and shares, said the living wage was “irrelevant”.

The company, which paid out £360m of “surplus cash” to shareholders last year in special dividends and share buybacks, has also come under fire for pushing long-serving workers into new contracts cutting premium pay for working on Sundays. About 800 workers were affected by the changes, losing up to £1,000 a year each.

George Gabriel, an activist at Citizens UK who has been negotiating with a string of British retailers over the living wage, said Next’s action on Sunday pay was part of a wider trend.

“All of that has stopped and what’s becoming the new normal is a low basic rate with significant performance components. People are getting just one or two benefits like a staff discount or a uniform allowance, but you can’t support a family with a staff discount,” Gabriel said.

At the Next shareholder meeting, the retailer’s chairman John Barton said he “agreed with the principle” of a living wage but it was “not for us to endorse”.

“We don’t run the business to satisfy the needs of the living wage,” he said. “We try to pay as much as we reasonably can in the context of the environment we work in. The research [into the living wage] helps us understand the problems but it is not our job to endorse you.”

Wolfson, who wrote to staff saying he was “mortified” by the reporting of his comments on the living wage, told the meeting: “We take those issues extremely seriously.” But he added: “Given the huge variety of needs across the UK and of our wage force it is very difficult to assess the [living wage] requirement you seek. What is important is the progress we’ve made in terms of wages and contracts.”

He said Next had made progress on pay in recent years. Last year Next raised wages for its lowest paid staff by 6% and increased the average number of contractual hours per worker so that on average staff earned 33% more. This year the basic rate of pay will rise 5% to £7.04. Wolfson, who said he would share his own bonus among workers if there was a shortfall in funding for that rise, said staff are likely to earn an average 56p an hour extra in bonuses on top of that hourly rate taking their wage to around £7.60 an hour. That still falls short of the living wage.

“We may not be where you want us to be but I hope you recognise we have made significant progress,” he told campaigners at the meeting.