Napoleon famously branded Britain a nation of shopkeepers. Not any longer. The State of Retail findings not only show a remarkably consolidated industry, but also a rapid advance by the biggest players. More than half of all retail spending happens at Britain's top 20 chains, the report says.

It is not surprising that the biggest companies are making the most money, given nationwide reach and economies of scale, but it is perhaps surprising that they are moving quickest. The profit margins of retailers turning over less than £100 million was 2.4 per cent, but for companies with a revenue of between £100 million and £400 million, margins rose to 3.2 per cent, and to 4.9 per cent for companies turning over more than £400 million.

Richard McKenzie, of OC&C, the consultancy behind the report, said: “The importance of being a major player is critical. By the time you're a £100 million retailer, you're not small. But the benefits of scale go far above that.”

In every category, apart from the highly varied DIY, home and gardening area, the market leaders by size boast significantly higher profit margins than the rest. “They can invest more money building the right ranges and buy more cheaply from suppliers. They can also employ better-calibre people. There is strong logic behind consolidation and in the context of a downturn that will only be amplified.”

Grocers, led by the “big four” of Tesco, Asda, Sainsbury's and Morrisons, are responsible for 68 per cent of retailers' profit growth. Grocers have increased their share of total spend to 51 per cent by using their core food businesses as a foundation to advance into non-food, although sales have also been buoyed by the soaring food inflation in the past year.

Yet while the tide is moving towards consolidation, there are interesting local currents elsewhere. Clothes retailers enjoy the healthiest margins to be found in the industry. Nimbler and smaller operators have proved adept at finding very profitable niches. Nine of the ten highest-margin retailers are clothing or jewellery sellers.

“The ability of smaller retailers to survive comes from the fact it's a high-margin category and because it's a repertoire-based area,” Mr McKenzie said. “Put simply, customers are reluctant to be seen wearing the same clothes as anyone else.”

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