Job losses and store sell-offs following Co-op’s takeover of Somerfield

Manchester-based The Co-operative Group (Co-op), has now bought rival Somerfield after months of discussions.

As a result of the £1.6 billion deal, the Co-op has become the UK’s fifth largest supermarket chain. The new business, which is owned by its members, will have an 8% share of the grocery market.

However, following the takeover, it is believed that thousands of job cuts and store sell-offs are on the cards.

It is believed that the Co-op will have to sell off 200 stores to appease the Office of Fair Trading (OFT) which monitors the number of stores in each region.

The deal is the largest in the sector since 2004 when Morrison’s purchased Safeway in a deal worth £3.1 billion.

Former Marks & Spencer executive, Guy McCracken, has re-vamped the Co-op’s food range and has extended the “Grown by Us” label, sourced from the Co-op’s own farmers and introduced a “Truly Irresistible” brand.

According to Greg Lawless of Blue Oar Securities, this transaction should do for the Co-op what buying Safeway has done for Morrisons. Co-op should be boosted back into the limelight.

Peter Marks, Co-op’s chief executive, said there is a strong strategic fit between the two supermarket chains and both are focused on the highly competitive convenience shopping market. He concluded by saying it is confident it will be able to work through competition issues with OFT.

The news of the job losses comes after figures from the Office for National Statistics (ONS) revealed that unemployment in the UK increased by 12,000 to 1.62 million in the 3 months to May.

The figures are the worst for 16 years after the amount of people claiming unemployment benefit rose by 15,500 in June to 840,100. Economists believe this could exceed a million by the end of 2009.

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