Administering the solutions?
Gillian Hamill and Fiona Donnellan report the views of Minister for Jobs, Enterprise and Innovation, Richard Bruton and Minister for Agriculture, Food and the Marine, Simon Coveney, on the key concerns facing retailers
Print18 June 2013
Ireland is not just papering over the cracks from a failed Celtic Tiger era, according to Minister for Jobs, Enterprise and Innovation, Richard Bruton. Speaking at the Retail Ireland Annual Conference held last month at the Aviva Stadium, the Minister said there are effectively two perceptions of Ireland; the view from Europe and the view from the inside. The truth, he reckons, is "somewhere in the middle".
"I think there are two faces of what’s happening in Ireland; there’s the international face of what’s happening in Ireland where we’re being [seen as] the poster boy of having to face up to our problems and then there’s another view of Ireland seen from the inside which is that this is the seventh budget, the seventh austerity budget if you like. People are feeling…the lack of confidence that’s there.
An economy in transition
"I suppose the truth is somewhere in the middle and the challenge for this government has been [that] after an earthquake the one big mistake that can be made is to try and build over the plans that were there before. We have not done that; our message has been one of transition to move away from an economy built on debt, built on construction, built on property escalating, to one firmly based on enterprise, export and innovation."
While Ireland has certainly moved away from an economy based on construction and property escalation, there could well be some quibbles over the extent to which we are now "transitioning" into one based upon enterprise. The success of our exports is easier to objectively quantify, with Bord Bia reporting in January of this year, that food and drink exports were valued at €2 billion, or 28%, ahead of 2009 levels. Naturally, the Minister provided several examples to support his positive prognosis though. "It’s there to be seen in the figures of the likes of IDA Ireland; a record year," he said. "The likes of Enterprise Ireland with the diversification of our exports; another record year. We’re seeing in government, 7,500 more people at work today than there was 12 months ago."
Risk averse banking system
A crucial factor in Ireland truly becoming an economy based on enterprise and innovation is the ability and willingness of our banks to lend to entrepreneurs. The Minister acknowledged that this is now a serious issue. "[Debt] has been at the centre of the banking system and it has itself become risk averse. We’re seeing it slower to respond to credit requests and there’s a higher refusal rate here than in most European countries…. Our strategy has been to look at that as well, and we’re very conscious of some of the pressures of the retail sector and a lot of our reform agenda has been aimed at that domestic sector."
While no cure-all panacea was announced for the banking sector, the Minister discussed several initiatives the government has introduced in order to benefit retailers.
Retailer reforms
"[We’re] particularly looking at systems like Sunday working provisions, we have reformed the PRSI, we’ve changed the low rate of VAT, we’re moving now in our next phase to reform the licensing mechanism for the retail sector where we will have the 25 different licences that retailers have to carry, we will consolidate them into one single portal where there will be one approach. We are introducing initiatives to bring more businesses online to recognise the opportunities that are there and must be seized."
Bruton also referenced the government’s wages subsidy initiative which aims to help create more jobs. This is vital, he notes because: "Every person who is back at work, is, from the exchequer’s point of view, contributing another €20,000, but also from the retail and the broader economy, €10,000 will be spent in shops and services.
‘A much more competitive economy’
"We are introducing a very clear subsidy for [employers] who are taking people off the dole. From July there will be a €72 per week subsidy for people who recruit a person who has been 12 months out of work. We are trying to make a lot of changes to make it easier for the retail sector to be innovative and respond to what I acknowledge is a difficult and challenging environment. Of course, confidence is at the heart of that.
"We are a much more competitive economy than we were two years ago and that’s reflected in costs right across the ECB. We’ve a lot of further reform to deliver. We have to reform key infrastructures, we have to reform our water systems, I think the message from government is clear in my view…we are seeking to create an environment in which enterprise, innovation and exporting can thrive. We’re willing to consider changes in a systematic way to get the standards and the accountability for the public that we’ve never seen before."
According to the Minister, there is also light at the end of Ireland’s troika-shaped tunnel. "We did successfully renegotiate the deal with the troika and we are well set to move out of the arrangement of the whole of oversized [deal] that was forced upon us. Yes, we still have a long way to go but I think we can look to the prospect that we will be exiting from the troika; we have met with most of our public finance challenges and this coming budget will probably be, hopefully will be, the last budget where we will have to seriously fill gaps within the public finances. Of course that’s dependent on international trade but I think we’ve come a long journey and I think there’s improved grounds for a sense of optimism for the future, not a sense of complacency or a sense of congratulation, but confidence."
Avoiding a protectionist approach
It is confidence that will enable Europe to expand into growing markets such as Asia, instead of adopting a protectionist approach, the Minister added.
Commenting on the European situation, he said: "We are also struggling with growth and jobs at a time when Europe has 26 million people that are unemployed and it’s purely a problem of low growth. We’re looking into a period when, over the coming years, 90% of the growth will be outside of the European Union, the trade growth, the GNP growth will be in the East and we have to be able to deal with that. Europe has no room for complacency but, I think the danger is that we react to that by saying ‘batten down the hatches’ and protect what we have, let’s not open up to trade, let’s not open up to the opportunities that are there in the market…If you look at what is bright in Europe, it is the unleashing of the Asian market…it is opening up to trade agreements, with the US, with India, with China, with the growth areas of the world and boldly pursuing those options."
He added that the digital arena offers enormous opportunities which retailers should embrace. "There is a huge digital market there today, but that market will be five times bigger very soon and if you don’t move to capture a share of that, then we’ll be dramatically left behind."
Opportunity knocks
Opportunity was likewise a recurring theme for Minister for Agriculture, Food and the Marine, Simon Coveney, speaking last month at the National Dairy Council (NDC) Annual conference, held in The Round Room in Dublin.
"Between 2015 and 2020, we’re looking for 50% growth in volume terms [in the dairy sector] and also a significant increase in the added value of the dairy product that we produce and export out of Ireland, but we also have to deal with the immediate challenges and crises as they occur."
Minister Coveney was upfront about the difficulties Ireland’s food industry has encountered over the past year. "This year, for the food industry, has been a challenging one. We’ve had the horsemeat crisis which affected the beef industry in a major way, we worked through that and we’ve come out the other side, in my view stronger than we were going into that crisis. Now we have a fodder crisis that we’re dealing with that is hitting the dairy sector particularly hard.
A resilient industry
"Regardless of the immediate challenges that we face, whether it’s horsemeat or whether it’s fodder, or whether it’s something else that may come next week, we will overcome those challenges because this industry is resilient, it’s competitive, it has a very strong and well founded skill set. It has foundations that are rock solid in good times or in bad and it has ambition for growth and expansion which is going to happen. We have been investing in this for the last two years."
Referencing the targets for growth contained within the government’s Food Harvest 2020 programme, the Minister’s message was a positive one. "What I’m saying to you is this: the dairy industry in Ireland has an exciting future. We have some of the smartest young people in the country going into this sector now because they see it as exciting. We have universities designing courses to facilitate Food Harvest 2020. We have Teagasc developing new places and asking for more staff in agricultural colleges to deliver on that as well.
"Ireland has been through a very, very, difficult five years. And we’re going to still have a number of difficult years ahead. Even though recovery is happening, it’s slow. So our economy needs champions, our economy needs individuals and sectors that can inspire others into believing that our economy is moving in the right direction again and this time it’s sustainable, it’s real."
Dairy is flagship growth sector
The Minister added that diary was "the flagship of that growth story". He said that in his opinion, the most significant announcement for the year, for the Irish economy as a whole, happened the previous day. Glanbia had announced its commitment to spend EUR*180 million at Bellview and other facilities. The previous year, he believed "the most significant announcement by any one company for the Irish economy came from Kerry Group when they announced that they would set up their global food innovation centre in Naas, employing a thousand people on an average salary of about EUR*80,000."
Coveney highlighted that the Glanbia announcement will result in over 1,600 new jobs to build a facility that will process 700 million litres of extra milk per year. He said Ireland’s other co-ops were looking to make a significant investment also and that this would result in impressive growth.
"We need to make sure that that is sustainable, financially as well as environmentally and we need to plan for that. We need to make sure that we invest in the research and the technology that can allow us to do that and use world class innovation to make it happen. If we do that, in my view, we will look back in 20 and 30 and 50 years’ time at the period 2014-2020 as an extraordinary period of growth and change for the Irish dairy sector."
In praise of Tesco
While naturally, the Minister referred to the dairy industry specifically at the NDC conference, his message tied in with the enthusiasm he had expressed earlier that morning for the country’s agri-foods sector as a whole. Speaking at the launch of the 2013 Tesco/Bord Bia Supplier Development Programme, the Minister praised the "passion" of the suppliers who were taking part in the initiative.
He was similarly full of praise for Tesco and described the involvement of 16 indigenous Irish companies last year as a move that created "significant and exciting growth". He said that a large multinational retailer like Tesco "opening up knowledge and experience" was "invaluable" for companies in the specialist food sector who are "almost artists". He added that Tesco’s infrastructure offered major opportunities for Irish suppliers – accounting for nearly 10% of all Irish food exports and delivering a "seamless" route between Ireland and the UK.
Minister Coveney duly alluded to the importance of "building the type of relationship that can allow us all to grow" and "ensuring there are no abuses". Yet he stopped short of explicitly referring to the government’s promised Grocery Code of Conduct. This is not terribly surprising; he was no doubt keen to avoid controversy at an event which was celebrating Tesco’s involvement within the country’s food industry. However government needs to take a firm stance on this issue that does not simply pander to the views of retail giants. Otherwise this ongoing challenge will forever remain the elephant in the room – a scenario which many food suppliers would argue we simply cannot afford to allow happen.
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