In a tough retail climate, Britain's leading stores and retailers are cutting back on investment in their businesses and increasing cash reserves, according the British Retail Consortium. In a study for the BRC carried out by Oxford Economics examined 21 FTSE-listed retailers and found that average individual cash holdings rose 50% between 2006 and 2011, from £283 million in 2006 to £424 million in 2011. While cash balances rose, investment as a proportion of turnover fell by 27% over the same period.
British Retail Consortium director general Stephen Robertson said: "These figures suggest the Chancellor has much more to do to inspire confidence in business. Retail could drive growth and job creation across the UK if the trading conditions were right. But, over the last five years, retailers have been accumulating cash they are often too fearful to invest. The decisions the Chancellor takes will have a big impact on when and where those businesses expand.
"Like other sectors, retail investment is globally mobile. Overseas markets have become increasingly attractive. To secure serious growth the Chancellor needs genuinely to deliver on making the UK more competitive than its rivals for that investment."
The BRC is submitting recommendations to the Chancellor ahead of next month's Budget, and is warning that he must create conditions that encourage retailers to turn that cash into growth-producing investment. In addition it will say that he must improve UK competitiveness to make it more attractive for retailers invest in the UK than abroad.
In its Budget Submission 2012: Towards Competitiveness the BRC set out its priorities for a more competitive UK which include:
Lowering the planned 5.6% increase in business rates to no more than the 3.2% CPI expected at the time of introduction. The BRC argues that retailers use a lot of property, therefore leaving them more exposed to increases in business rates.
The government should work with retailers and landlords to achieve wide take-up of the new Small Business Lease that was developed with the Royal Institute of Chartered Surveyors to increase business cost certainty. The BRC argues that affordable and predictable property costs are key to survival rates.
Image: Oxford Street