Retailing: Large retailers plan to increase investments clearly in 2007

The results of the most recent Ifo Investment Survey confirm an overall increase this year in German retailers’ propensity to invest. However, the differences between large and small retailers have grown further in this respect. Large retailers (annual turnover of more than 25 million euros) have clearly profited from the current upswing and anticipate growth in turnover for this year. As a result they plan to invest more in equipment and construction measures, in addition to hiring more personnel. In contrast, most small retail businesses are pessimistic in terms of their economic outlook and plan to reduce their investments. Financing difficulties due to sluggish business in the first half of 2007 and unfavourable lending conditions often stand in the way of implementing the necessary investments. It would in fact be beneficial for small firms to invest now in order to take advantage of the declining balance depreciation option that will expire in 2008. By postponing investments many small retailers will continue to lose market share to the large retail chains.