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Monday, November 1, 1999 Published at 13:53 GMT

Business: The Company File

M&S 'turning its back on Britain'

Marks & Spencer is fighting to reverse a profits plunge

Most goods sold by high street giant Marks and Spencer will be made abroad following a decision to end a contract with one of the firm's leading UK suppliers, a union has claimed.

The broadside from the GMB Union, which says Marks is betraying British suppliers, comes as the company prepares to announce another profits slide on the scale of last year's 42% plunge.

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The union says the "cost-cutting" move to end a contract with William Baird - with the loss of thousands of jobs - will leave M&S producing just 44% of its goods in Britain.

Des Farrell, the GMB's National Secretary for clothing, said: "It seems they are now prepared to dispense with the loyalty of both staff and their customers in a desperate bid to drive down costs.

"Everyone is aware of the difficulties facing the company, but sacking thousands of workers, gambling with the quality of the product and destroying a lifetime reputation for backing British suppliers is no way to build a foundation for recovery."

Some 27,000 jobs have been axed at firms supplying M&S in recent years, said the GMB.

Stores to accept plastic

Marks is believed to be on the verge of accepting credit cards in an attempt to reverse its sales slump.

M&S chiefs have always refused to take credit cards for payments. They have insisted on only taking their own store card, debit cards or cheques.

[ image: M&S stores may soon accept credit cards]
M&S stores may soon accept credit cards
But as the decline in sales goes on, they have been looking for ways of wooing customers back.

Last month, department store John Lewis bowed to modern technology and started accepting Visa and Mastercard. That store also made the announcement as profits fell.

A spokeswoman confirmed that the M&S board had been discussing whether to change its policy.

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Bosses have already embarked on a campaign to turn the store's fortunes round, involving new fashion lines, advertising and voucher give-aways.

Sales over the first six months of the year are believed to be down 7.8% on a like-for-like basis and down nearly 12% in the crucial clothing sector.

Profits set to plummet

Analysts are expecting pre-tax profits to be cut to nearly a quarter of those at the same stage last year: about £90m, compared with £348m.

A profits warning last month braced analysts for pre-tax profits of £185m to £195m. The company also warned of a sluggish start to autumn-winter sales.

Chief executive Peter Salsbury pledged in September to make an announcement on credit cards with the half-year results.

M&S has been reluctant to provide alternatives to its storecards because they provide in-depth details on shopping habits.

It is also opposed to paying the commission charges levied by credit card companies.

Observers will also be watching for any announcements by M&S on the property it owns. Retail groups such as House of Fraser have recently mortgaged their retail estates to raise money for shop revamps.

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