Investment in the convenience sector has fallen over the last quarter as retailers prepare for the impact of the business rates revaluation and upcoming increases to employment costs, according to the Association of Convenience Stores (ACS).

In its latest survey it found that between December and February, convenience retailers invested £154m in their businesses, taking the total invested in the past 12 months to £846m.

The latest quarter’s figures are down significantly on the previous quarter, where investment levels hit a record high of £299m.

Key findings include:

• The average investment per store over the last quarter was £3,068;

• 78% of retailers are funding investment through their own reserves;

• 16% of stores plan on investing in their stores over the next 12 months, while only 1% of retailers plan to buy stores.

ACS chief executive James Lowman said: “The latest investment figures show that while thousands of stores are making improvements in their business, there is hesitance to invest at a time when business rates bills are going up for many and the new rates of the National Living Wage come into force in April.

“The vast majority of independent retailers fund investment through their own reserves, so it’s not surprising that investment plans are being delayed in an effort to prepare for increased costs in other areas of the business.”

In April this year, the rate of the National Living Wage is set to hit £7.50 an hour for workers aged 25 and over. ACS research has shown that stores react to increases in employment costs by cutting staff hours, delaying investment and taking on more hours in the business themselves.

Additionally, ACS has been campaigning for changes to the business rates system which would incentivise retailers to invest rather than penalising them for doing so. The current system views any investment in a store as potentially increasing that properties’ value and therefore increasing their rates bills as a result.

Lowman added: “The Government has taken the short-term measure of making discretionary relief available for the hardest hit businesses, but this does not fix the long-term problem that retailers are put off improving their stores by fear of huge hikes in their rates bills.

“During the Budget, the Chancellor committed to looking more closely at the way the rates system operates to make it fairer for all businesses – as part of any review he must consider ways to incentivise investment.”

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