Two thirds of mid-sized retailers are putting investment plans on hold as they absorb the latest global shock, with rising costs and supply chain disruption weighing heavily on the sector.
Research from BDO LLP finds that 57% of retailers say a mix of supply chain pressures and higher energy and fuel costs are among their biggest challenges as they respond to the impact of conflict in the Middle East. The bi-monthly survey covers UK businesses with revenues between £10m and £500m.
Supply chain issues remain a key concern. Two in five retail leaders (39%) point to delays, rising material costs, stock shortages and supplier failures as major pressures. At the same time, more than a third (36%) highlight the rising cost of employment and difficulties finding skilled staff.
Impact on decision-making
This uncertainty is feeding directly into decision-making. Some 69% of mid-sized retailers say they plan to halt or reduce investment, a higher proportion than the 60% average across all sectors.
Retailers are also weighing difficult trade-offs. Nearly four in 10 (39%) are considering increasing prices for customers, while 29% say they may delay hiring or reduce headcount.
The findings follow a weak start to the year for trading. BDO’s High Street Sales Tracker reported that April was the worst in a decade outside of the Covid-19 lockdown period, with all three discretionary categories seeing year-on-year sales declines.
Government support needed
Business leaders are now calling for government support, including help with supply disruption, measures to ease employment costs, and relief on transport and fuel.
Responding to the finding that retailers are putting investment plans on hold, Sophie Michael, BDO’s head of retail and wholesale, said: “Retailers were already grappling with increased costs, low consumer confidence and super tight margins, and are now facing serious repercussions on top from this latest global shock, which has added a new layer of unpredictability that is eating into their confidence and weighing on their appetite to invest.
“Given retailers are scaling back their investment at a higher rate than much of the wider economy, it is vital that the government works with the sector directly to restore confidence and create the conditions they need for growth.”
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