AO World chief blames Labour as record profits mask shift of 200 jobs to South Africa

John Roberts does not do diplomatic. The founder and chief executive of AO World has rounded on the government after the online appliances retailer confirmed it is shifting the bulk of its customer contact operation to South Africa, a move he laid squarely at the door of higher employment taxes and a rising minimum wage.

The company, best known for selling everything from laptops to fridges and washing machines, has already offshored around 150 sales roles, banking savings of roughly £2 million so far and pointing to annualised cost reductions of about £4 million. A further 50 jobs are due to be created in South Africa, with most of AO World’s customer contact work expected to be based overseas by next March.

Roberts, who built the business from a £1 pub bet in 2000, said the retailer was carrying an extra £8.5 million in annual costs after the government’s decision last April to lift employer national insurance contributions and push through an above-inflation increase to the minimum wage.

“The brutal truth is that, of course, these roles could have been in the UK,” he said. “When you make these staff ever more expensive and ever more inflexible, that’s what businesses are going to do. We’ve got a political class that doesn’t understand business. They live in an economic fantasy land.”

It is a complaint that will resonate well beyond Bolton. The combined weight of a 15 per cent employer national insurance rate and a sharply lower secondary threshold, introduced in April 2025 alongside a 6.7 per cent rise in the National Living Wage to £12.21 an hour, has reshaped the maths for any firm with a large, lower-paid workforce. AO World is simply one of the larger names to act on it, joining the likes of Morrisons, which has blamed Labour’s “policy choices” for a wave of store closures, and JCB, which paused a 500-job hiring drive as the tax changes bit.

For smaller employers the squeeze is arguably sharper still, with the lower threshold dragging part-time and entry-level roles into charge for the first time. Guidance from the government-owned British Business Bank underlines how tightly wage floors and payroll taxes now interact, a dynamic Business Matters has tracked as employers absorb a national insurance bill running billions of pounds above Treasury forecasts.

Yet the political broadside lands on a set of results most chief executives would happily own. On an adjusted basis, pre-tax profit rose a better-than-expected 16.1 per cent to a record £50.5 million in the year to 31 March, helped by a turnaround at the contract mobile phone arm and at MusicMagpie, the used-electronics specialist acquired in 2024. Revenue climbed 11.4 per cent to £1.3 billion, also ahead of expectations, with a 17 per cent jump in television sales in May as shoppers geared up for the football World Cup.

The board rewarded investors accordingly, unveiling a £10 million special dividend and confirming plans to return a further £20 million this year, split evenly between another special dividend and a fresh share buyback. The numbers vindicate the “pivot to profitability” Roberts has pursued since the pandemic-era online boom faded, a period in which AO’s shares were battered by wobbling consumer confidence, rising labour costs and fierce competition.

That reset has been deliberate. Roberts has spent recent years taking what he calls “the grit out of the machine”, stripping out costs and simplifying the group after it considered shutting its loss-making mobile division and, in 2022, closed its German operation following a strategic review. The post-pay mobile business is now profitable after improved commercial terms with network partners and expanded tie-ups with Samsung and Lebara, while analysts at Peel Hunt flagged a return to profit at MusicMagpie.

The wider picture is one of a business in rude health. AO World, a constituent of the FTSE 250, added 720,000 new customers over the year to take its base to 13.3 million, and has wiped out its debt, swinging to £16.4 million in net funds from liabilities of around £35.9 million a year earlier.

Investors, though, were unmoved on the day. Shares gave up an early gain of 2.6 per cent to close down 4.69 per cent, or 4½p, at 91½p, with the stock off roughly 3 per cent amid heightened geopolitical tensions since February.

Management, too, struck a note of caution, warning that the external environment remained “uncertain, with ongoing geopolitical pressures impacting both consumers and input costs across the economy”. Profit for the 2027 financial year is expected to come in around £54.6 million, broadly flat on the year.

For now, the headline AO World would rather you remembered is the record profit. The one its founder wants ringing in ministers’ ears is the 200 jobs that, on his telling, did not have to leave Britain at all.

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.