UK retailers are increasing cash reserves rather than investing in business expansion and job creation as a result of economic uncertainty, an independent study by Oxford Economics for the British Retail Consortium (BRC) has found.
The BRC’s study, which examined 21 FTSE-listed retailers, found that average individual cash holdings doubled between 2006 and 2011 – from £283 million to £424 million respectively.
However, whilst cash balances rose, investment in proportion to turnover fell by 27 per cent over the same period, indicating that concerned businesses are cushioning themselves as a result of financial instability.
Forming part of the BRC’s submission to Chancellor George Osborne ahead of next month’s Budget, the study reveals that the latest optimistic retail figures, in fact, mask larger concerns.
Official figures from the Office for National Statistics (ONS) show that retailers in January enjoyed a boost to sales as the value of retail sales increased by 4.4 per cent compared to the same period last year. Sales volumes also increased by 2 per cent compared to last year, which were primarily driven by non-store retailing and food stores.
The BRC, however, indicates that retail discounting is the main factor driving sales, as concerned businesses attempt to lure cash-strapped consumers who face another difficult year.
It is now warning that the retail sector must implement alternative and sustainable growth plans, and called for the Chancellor to do more in creating economic conditions that encourage business investment – or risk losing UK investment overseas.
Speaking of the BRC’s study, 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.”
