UK retailers face GBP £25 billion tech modernisation bill

PMC and Retail Economics said UK retailers face a £25 billion bill to modernise legacy technology systems, equal to 5.3% of annual retail revenue.

Their latest report highlights the scale of ageing systems across the sector as retailers weigh core technology spending against pressure on margins and consumer demand. The research was based on responses from more than 100 senior commerce leaders.

The report said legacy technology is creating what it called innovation debt, as businesses continue to support older systems while trying to fund upgrades. That tension is forcing retailers to choose between maintaining current operations and investing in broader digital change.

According to PMC, the modernisation bill reflects the complexity built into many retail organisations over time. Older systems often require extra integration work, increase maintenance costs and slow the deployment of newer tools.

Against that backdrop, retailers are focusing investment on a narrow set of priorities. Data integration to support AI readiness was the most commonly cited area for the year ahead, selected by 41% of those surveyed.

Systems integration and cyber security followed, with 36% of respondents naming each as a leading investment priority. The focus on security follows a run of cyber incidents affecting retailers including ASOS, H&M and TFG London.

Investment priorities

The results suggest many retailers are trying to strengthen the foundations of their technology estates before moving to wider transformation projects. Integrating data and systems can reduce fragmentation across online and store operations, while spending on security has become more urgent as attacks on the sector continue.

The study also found that 56% of retailers said digital transformation had driven revenue growth for their organisation. That suggests that, despite the cost of replacing legacy systems, many businesses are seeing a commercial return on technology investment.

Rich Lowe, Chief Executive Officer, PMC, said the estimate reflects both external trading pressures and internal complexity. "The scale of this modernisation bill underscores just what retailers are up against - not only are they having to trade against fragile customer demand and volatile conditions externally, but they're also facing the cost of unpicking complexity within their own organisations," he said.

He added: "However, behind the headline cost lies significant opportunity and, with the right systems, people and partners in place, retailers can unpick those complexities, stitch by stitch, and turn a cost burden into a strategic driver of growth."

Margin pressure

The research comes as retailers continue to manage subdued consumer demand alongside the need to update technology built for earlier stages of eCommerce and store operations. Many groups now run multiple platforms across sales channels, fulfilment, payments and customer data, making replacement programmes costly and difficult to sequence.

That leaves boards facing a trade-off between short-term margin protection and longer-term investment. Delaying upgrades may preserve cash in the near term, but it can also add to technical complexity and increase the eventual cost of change.

Lowe said this dynamic risks slowing innovation further if businesses do not act. "Retailers know they need to balance protecting margins today with investing for tomorrow," he said. "But putting off modernisation only makes the problem bigger - legacy complexity compounds, change becomes harder and innovation gets slower. Breaking that vicious cycle relies on a foundational reset. Supported by the right partners and tech ecosystems, retailers can ready themselves for growth, moving faster, innovating more effectively and staying competitive in the long term."