Local Shop Investment Tempered by Rising Employment Costs

Written by Leah Myers

The latest ACS (Association of Convenience Stores) Investment Tracker shows that local shops have invested £600m in their businesses over the past twelve months, including a record £181m in the last quarter.  However, investment levels per store are down compared to the same period last year, and ACS is concerned that investment, particularly among smaller independent retailers, is being delayed as they come to terms with rising employment costs such as the National Living Wage and auto-enrolment pensions.

Key findings from the survey include:

  • Convenience retailers invested £181m in their businesses in this quarter, up from £146m from the previous quarter, and up from £177m in the same quarter in 2015.
  • Overall spend per store has declined by 1.4% year-on-year.
  • Symbol groups are the only segment of the sector showing an increase in the amount invested compared to the same quarter in 2015, and the last quarter.
  • 69% of independent retailers are funding investment from their own reserves.
  • The areas attracting most investment in stores are refrigeration, shelving and lighting, all of which have seen increases in investment this quarter.

Commenting on the results, ACS Chief Executive James Lowman said: “These results confirm that convenience stores are a crucial part of the economy, investing £600m over the past year in communities up and down the country.

“However, in this crucial quarter for investment – with retailers gearing up for Summer trading – we have seen a decline in the amount invested per store.  We are concerned that this is due to the introduction of the National Living Wage which we know forces retailers to review investment decisions because it is now much harder to get a return on those investments as their costs rise sharply.

“We are also seeing a split developing, as symbol group retailers make bigger investments while investment by non-affiliated stores is down year on year.  Retailers who don’t invest now risk becoming uncompetitive as they will miss out, notably on the opportunities to sell more fresh and chilled products with increased refrigeration.

“It remains a concern that most retailers are investing from their own reserves, with only 7% accessing bank finance.  At the moment retailers are waiting to build up their own reserves before making these investments, which suggests that they are still very cautious about taking on debt, and also indicates that the banking system is not working for local shops.  The CMA inquiry into banking for small businesses needs to address the cost and availability of bank finance for local shops, and we are submitting this evidence to that inquiry.”

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