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The boss of AO World has hit out at the government after it shifted hundreds of jobs to South Africa in a bid to dodge soaring employment costs.

John Roberts, chief executive of the electrical retailer, claimed the UK’s political class lives “in an economic fantasy land” and blasted Labour for forcing his company to cut back on hiring British workers.

The FTSE 250 firm said it has already moved the majority of its inbound sales business overseas, with the bulk of its customer contact operations to follow next March.

The company said it has been saddled with an extra £8.5m per year in costs due to Labour’s hikes to employer national insurance contributions and minimum wage levels.

Roberts said on Wednesday: “The brutal truth is that, of course, these roles could have been in the UK. 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.”

Retailers have ramped up pressure on the government in recent weeks over these tax and policy changes, warning that higher employment costs risk worsening the youth unemployment crisis.

AO said it has already moved 150 jobs to South Africa, with 50 more to follow, and expects that “the majority of our customer engagement operations being based overseas by the end of the financial year”.

This move “maintained service quality” and saved the retailer £2m this year and is expected to produce annual savings of £4m in the coming years, it said.

Susannah Streeter, chief investment strategist at Wealth Club, said AO World is the latest in a “long line” of companies to restrict hiring in the UK in response to rising labour costs.

“For a technology-driven retailer like AO, many back-office, customer service and support functions can potentially be delivered more cheaply offshore, but these are the types of roles which are often entry-level, giving workers their first step on the workplace ladder,” she said.

AO World has reported a more-than-doubling of profit as it stood by its acquisition of online trade-in platform Music Magpie, which had been dragging on growth.

The electrical retailer reported growing profit and revenue and said that Music Magpie is now “run rate profitable”. 

The second-hand online marketplace had been turning a £6m loss and bemoaning a “challenging” economic environment when it was snapped up by AO World for £35m in December 2024.

Music Magpie added £3.5m in advertising costs, £7.3m in warehouse fees and £11m in administrative spending to its new owner’s balance sheet in the year to March. But AO World said its new acquisition was responsible for “the majority” of its 181 per cent jump in revenue in the second-hand commerce market, to £120m.

The FTSE 250 retailer’s turnaround of Music Magpie was engineered through the exit from its loss-making US operations and the consolidation of its warehouse footprint, it said.

Profit before tax across the AO World group jumped by 145 per cent to £51m, while revenue climbed 11 per cent to £1.3bn.

The group achieved total liquidity of £201m at the year’s end, with profit converted to cash resulting in free cash flow of £66m, up 152 per cent from the year prior.

AO World announced a new £10m special dividend and a separate £10m share buyback programme, reflecting its “strong cash generation” over the past year.

The firm toasted its position as the UK’s “most trusted electrical retailer” after becoming the first retailer globally to exceed one million Trustpilot reviews, with a 4.9-star rating.

AO’s founder and chief executive, John Roberts, said: “In a category as demanding as ours, that trust is hard-won and almost impossible to copy. It sits nowhere on our balance sheet, yet it’s among the most valuable things we own.”

The group said it is adapting to dwindling demand for phone contracts by overhauling its post-pay mobile business. This arm had been loss-making, but AO said on Wednesday that it is now profitable.

The retailer said it is “confident in its ability to grow revenue,” but noted the uncertainty posed by “geopolitical volatility, cost inflation, shifts in consumer demand and rapid technological change”.

Chris Beauchamp, chief market analyst at stock broker IG, said AO World is “swimming in cash” and is well positioned to benefit if inflation begins to tail off in the coming months.

“A turnaround in its debt position and a surge in pre-tax profit is great news for shareholders, and news of more largesse in the form of dividends and buybacks should provide the fuel for a further recovery in the shares after a tough first half of 2026,” he added.

AO World, founded as Appliances Online in 2000, is based in Bolton. Its shares rose 2.6 per cent to 98.5p on Wednesday.