Retailers plan more investment in stores, despite business rates barrier

Mid-market retailers are looking to invest in their physical stores in the next two years, new research from RSM shows.

According to the survey of 250 senior executives who work in UK-headquartered retail businesses with a turnover between £10m and £750m, 58 per cent of physical retailers plan to increase the footprint of their retail stores, increasing store space and enhancing the in-store customer experience.

However, over a third (34 per cent) stated that business rates are the biggest barrier to remaining competitive.

“Retailers are pushing ahead with this investment despite the ongoing burden of business rates and the crippling impact that they are having on the sector. Many will be hoping the long-awaited business rates review due this Autumn will deliver significant changes, in particular reducing the tax that can be higher than rents in many cases,” commented Jacqui Baker, head of retail at RSM UK.

“Realigning this imbalance is crucial to support the sector to compete effectively with online only businesses and others vying for a share of consumer spend. The government needs to step up and announce business rate reform in the Autumn Statement to safeguard the future of the high street.”

The survey also revealed that the shift in focus to online continues and the majority of retailers are looking to enhance their online offering with 83 per cent and 78 per cent looking to increase the volume and range, respectively, of products online.

60 per cent of retailers plan to increase warehousing in the next 12 months to support this shift, although almost a quarter state the cost of warehousing (24 per cent) and the availability of warehousing (23 per cent) is a further barrier to remaining competitive.

Kelly Boorman, head of construction at RSM UK, noted that the acute demand for warehouse space is fuelling rent inflation and supply shortages, alongside the boom in construction as the UK plays catch up to this accelerated shift in consumer behaviour.

“However, wide-spread material and skills shortages across the construction sector, combined with challenges around planning, are slowing down progress, which could create a longer-term barrier to growth for retailers,” Boorman added.