The UK's biggest retailers have increased their IT spending by 27 per cent this year to £1.8bn.

The rise in investment from the country's 100 largest store chains indicates a growing realisation that technology can be translated into business benefit, says the second annual IT in Retail study from the Retail Knowledge Bank.

High on the sector's list of IT priorities are chip-and-pin projects, generating more value from the supply chain, radio frequency identification (RFID), mobile technologies and an increasing reliance on the internet.

But the average spend for the top 100 companies is 1.1 per cent of sales, a much lower figure than US counterparts who spend two per cent on average.

'As technology and its business use matures, technological innovation within the retail sector has developed down two distinct paths,' says the report.

'The first is the continued appearance of new technologies specific to the retail industry such as RFID, mobile solutions and chip-and-PIN. The second is the development of better integration, whether between applications within the same organisation or between business partners down the supply chain,' it says.

Some 77 per cent of retailers say they have no plans to implement RFID, but 10 per cent are seriously investigating the technology, five per cent intend to use it in the next year and eight per cent are already using the system.

The survey suggest that seven out of ten companies say they will be ready to handle chip and PIN-based card transactions by the end of 2004. Some 11 per cent are still in the planning stages and have no fixed go-live date.

The survey also found that the internet and data warehousing systems are now regarded as extremely important to many retailers.