Rising taxes and business rates are stalling investment across the convenience sector, according to the ACS.
The stagnation of investment comes as government removed hundreds of millions of pounds in rates relief and increased employer National Insurance contributions over the past two years, the trade body said.
ACS said that while lower multipliers introduced in April, which gave small shops a 38.2p rate compared to 43.2p for non-retail businesses, were welcome, the 5p lower rate “goes nowhere near enough” to offset the 40% rates relief that was removed earlier this year.
This came at the same time new rateable values were introduced under the 2026 revaluation, meaning properties were seen to be more valuable than they were before, which were also adding to retailer bills.
As a result, investments made by convenience retailers dropped to around £900m annually in 2025 and 2026 after reaching record levels of over £1bn in 2024, according to its 2026 Local Shop Report, released today (7 September).
It also found inflation was outpacing sales across the sector. While total sales are forecasted to reach £49.1bn this year, marking a 0.6% increase on 2025, inflation stood at 2.9% on average over the past 12 months.
ACS said this has left retailers needing to find efficiencies and claw back margin on products and services to make ends meet.
The report shows a continued increase in the number of stores using technology to reduce labour costs, with self-service tills in one in five convenience stores in the UK, alongside electronic shelf-edge labels featured in 14% of stores.
ACS has warned government that convenience stores can’t continue to take the brunt of cost increases without consequences. In its submission ahead of the budget last week, ACS set out the decisions already being taken by retailers, including reducing staff hours, owners covering more hours themselves, reduced or delayed investment, and in some cases the sale of the business altogether.
“Local shops are incredibly resilient, but they can only absorb so much before difficult decisions have to be made,” said ACS CEO Ed Woodall. “It is clear that tax increases and new regulations are impacting retailers’ ability to invest and grow, which could in turn make them less able to adapt and continue to deliver the services and support that communities rely on.
“Retailers are gathering in Parliament this week to send a clear message to the prime minister that the cost of trading needs to be addressed. Local shops have spent decades embedding themselves in their communities, supporting local people and providing hundreds of thousands of jobs. We’re not looking for handouts, what we need is some breathing space to be able to invest, innovate and keep delivering for the communities we serve.”
Additional findings from the 2026 Local Shop Report found convenience stores provided over 456,000 jobs across the UK, with 97% of colleagues employed on a permanent contract, and for the first time this year, a third of retailers owning and running stores are under 30 years old.
Almost half of retailers (47%) also now offer some form of home delivery service, and 78% were active in their community, such as collecting money for charities, sponsoring local sports teams, and getting involved with local litter picks and other initiatives.
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