By Daniel Hunter

New, pre-Budget research for the British Retail Consortium (BRC) shows economic uncertainty is causing retailers to hold back investment and increase cash reserves.

In its submission to the Chancellor ahead of next month's Budget, the BRC is warning that:-

- He must create conditions that encourage retailers to turn that cash into growth-producing investment.

- He must improve UK competitiveness so it is more attractive for retailers to make that investment in the UK than abroad.

The independent study for the BRC by Oxford Economics examines 21 FTSE-listed retailers. It shows their average individual cash holdings rose by fifty per cent 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 per cent in real terms over the same period.

"These figures suggest the Chancellor has much more to do to inspire confidence in business," British Retail Consortium Director General Stephen Robertson said.

"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."

In its Budget Submission 2012: Towards Competitiveness the BRC sets out its priorities for a more competitive UK where businesses are confident to invest. The key three are:-

Business Rates — retailers use a lot of property, leaving them more exposed to increases in Business Rates than other sectors. The BRC calculates that the 5.6 per cent increase currently planned for this April will cost retailers in England, Scotland and Wales an extra £350 million in 2012/13. This increase should be lower. At the very most the rise should be no more than the 3.2 per cent CPI expected at the time of introduction.

To encourage a business - friendly approach, local authorities should be allowed to keep extra Business Rates revenue generated from business growth in their areas to spend on infrastructure improvements.

Capital Allowances — generating economic recovery requires businesses to invest in equipment and technology. Building on commitments for some 100 per cent capital allowances in Enterprise Zones, the Chancellor should make similar incentives available in all regions and to businesses of all sizes.

Online Single Market — the UK is a world leader in online retailing with Europe's highest per-head online spending. Other EU markets offer huge potential growth for the UK's online retailers. The Government must push the EU harder to remove barriers and create a genuine single European digital market.

In addition the BRC submission says:

One In One Out - the Government's promised ‘one-in-one-out' on regulation must be made to work in a meaningful way. Too often the proposed ‘outs' are not relevant to the sector affected by the ‘in'. Scrapping long-obsolete war time trading regulations does not count. This has to be about removing rules that are actually holding business back now.

Relevant regulatory ‘outs' should be listed on the front of any Bill that will impose new requirements on businesses.

Property Costs for Small Businesses - retail closures are significantly exceeding start-ups. Affordable and predictable property costs are key to survival rates. The Government should work with retailers and landlords to achieve wide take-up of the new Small Business Lease (developed with the Royal Institute of Chartered Surveyors to increase business cost certainty).

Planning Reform and Town Centres - we support the Town Centre First approach for retail and leisure developments but it should be retained for office developments too. Having people working in town centres is essential to their viability.

"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," British Retail Consortium Director General Stephen Robertson added.

"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."

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