BRC says retailers are boosting cash reserves as economy slows
Research by the British Retail Consortium has shown that tough economic conditions are leading retailers to cut back on investment and increase cash reserves.
The 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.
Allowing local authorities to keep extra business rates revenue generated from business growth in their areas to spend on infrastructure improvements.
Building on commitments for some 100% capital allowances in Enterprise Zones, the BRC said the Chancellor should make similar incentives available in all regions and to businesss of all sizes as economic recovery requires businesses to invest in equipment and technology.
Pushing the EU harder to remove barriers to the creation of a genuine single European digital market. The BRC said other EU markets offer huge potential growth for the UK’s online retailers.
In addition the BRC is recommending that:
One In One Out, the Government’s promised ‘one-in-one-out’ on regulation, should be made to work in a more meaningful way.
Relevant regulatory ‘outs’ should be listed on the front of any Bill that will impose new requirements on businesses.
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.
Robertson added: “The Government says it’s backing business as the route to growth. But it has yet to deliver material change to the costs and difficulties of doing business. It must go further faster if the UK is to attract retail investment, create jobs and reinvigorate high streets.
“The Chancellor must be bold in his quest for growth. Addressing our concerns is vital to securing the potential of the UK’s biggest private sector employer. Quite simply, he must get on with it.”
