Marks & Spencer has announced it will create 1,000 new traineeships over the next three years, a move that will cost the retailer an estimated £50 million. The programme targets school leavers and the long-term unemployed, offering positions in stores, warehouses, and head office functions. This is the largest such initiative from a British retailer since the financial crisis.
Let us be clear about what this means for the macro picture. The UK labour market has been showing signs of strain, with the Bank of England warning of a tightening labour supply. Yet here we have a blue-chip high street name betting on the British worker. The traineeships will pay the National Living Wage or above, with a guarantee of a permanent role upon successful completion. That is a hedge against the growing skills gap that has been plaguing our economy.
From a fiscal perspective, this is a direct subsidy to human capital without a penny of government money. The Treasury will be rubbing its hands: every trainee taken off Universal Credit saves the state roughly £5,000 a year. Multiply that by 1,000 and you get a £5 million annual saving, plus the income tax and National Insurance contributions from those newly employed. It is the kind of private sector intervention that economic conservatives dream of.
But let us not get carried away. M&S is not doing this out of altruism. The retailer has been struggling with productivity and service levels. Last year's Christmas trading statement highlighted stock availability issues and checkout queue times that would make a Soviet grocer blush. This traineeship programme is, in reality, a reshoring of labour costs: train your own staff to the exacting standards you need, rather than relying on a transient gig economy. It is a capital expenditure on human resources.
The broader market implications are interesting. Gilt yields have been steady this morning, but this announcement could signal a shift in corporate attitude towards labour investment. If other firms follow suit, we might see a structural improvement in the NAIRU (non-accelerating inflation rate of unemployment). This would be a welcome development for the MPC, which has been wrestling with wage inflation that has been frustratingly sticky. More trained workers mean less upward pressure on pay, all else equal.
There is of course the small matter of the cost of living crisis. £50 million is a lot of money, but for M&S it is a rounding error. Their annual pre-tax profit is around £500 million. This is a long-term bet on the British consumer, which is in itself a bet on the British economy. If M&S is willing to bet, why should we not be cautiously optimistic?
Critics will say this is window dressing, a PR stunt. And yes, the timing is convenient, with the general election looming. But the substance is real. Those 1,000 trainees will have a CV that includes an M&S brand, which is still a powerful signal in the job market. For the City, this is a data point. If we see a fall in youth unemployment in the next ONS release, we will know whose traineeships to thank.
For now, the bottom line is this: M&S is doing what the government has failed to do. They are creating a pipeline of skilled labour. That is good for the economy, good for the Exchequer, and good for the nation's productivity. Whether it is enough to reverse the tide of capital flight and stagnant real wages remains to be seen. But it is a start.
