Left out in the cold
Fiona Donnellan speaks to Fianna Fáil spokesperson for small business and regulatory reform, John McGuinness; and Fianna Fáil spokesperson for agriculture, Éamon Ó'Cuív
Print18 June 2013
Fianna Fáil spokesperson for small business and regulatory reform John McGuinness is highly critical of the government’s action in trying to stem the flow of job losses and shop closures across the country since the recession began. The heavy burden of regulation and administration is one of the leading causes of closures according to McGuinness. "We’re into this recession now for the best part of eight years and during that period of time, a substantial number of shops, of family businesses, of small enterprises that would employ anything from one to10 people have closed. They’ll never be replaced again. They have not been able to cope with the heavy hand of administration."
The regulation of the retail sector is a bone of contention between opposite sides of the Dáil. Minister for Jobs, Richard Bruton announced at the beginning of this year, plans to amalgamate over 20 licences into just one in an effort to streamline the licensing and regulation of retailers and SMEs. The government plans to have the new system in place by the end of this year but McGuinness says it’s not enough. "We’ve heard that before. There should be just one licensing section that deals with every single licence. For example, if you have to go to court for your pub licence, you then have to go to the Revenue Commissioners to actually get the licence. You then have to renew it every year. That needs to be simplified. One licensing authority with a simplified application that can make the changes that are necessary, that can assist rather than obstruct, is what the retail sector needs now."
Support from local government
The issue of commercial rates has also been a contentious one for many years. Many retailers struggle to pay their rates to the local council and often cannot afford the charge. McGuinness says he is concerned by the local authority rate structure and believes that a self-assessing system should be put in place. "I put forward a bill in the Dáil that would allow people to self-assess themselves for rates. If they felt that they were out of kilter in terms of costs they would have a process whereby they would self-assess and they would then pay accordingly on that assessment. Alongside that, you need to include the ability to pay because there will be businesses, who for some reason or another, cannot pay the full amount. Arrangements have to be made in the context of our economy now, with that business to ensure that the enterprise survives and there is some payment for the local authority. I believe that that can be done easily, you have flexible systems in other countries." The concept of a different rate structure has been echoed by retail lobby groups in recent submissions to the Oireachtas. The National Federation of Retail Newsagents (NFRN) put forth proposals to the Oireachtas Committee on Jobs that included a rate relief scheme, similar to one rolled out in Northern Ireland last year.
However, local authorities across the country are attempting to come to arrangements with struggling businesses on the issue of rates. McGuinness says that local authorities are more open to engaging with its rate payers. "There are best examples out there of local authorities that will not charge you for the space that’s not being used, that will defer payments; that would spread payments over a period of time; that will take the first payment in June rather than in January. Much more needs to be done because one of the costs that cannot be adjusted for a small business by the small business itself is local authority rates."
Proposed code of conduct
The highly anticipated, proposed code of conduct for grocers draws strong opinions from all sectors of the industry. Most large multiples are against a code, saying that they adhere to their own rules and standards and do not need more regulation from government. McGuinness is also sceptical of the benefits of such legislation. "What is the code of practice? What is that code of practice being introduced by government going to do? Nobody knows until such time as it is actually introduced. At the moment, the code of practice, if you like, is one that is driven by the market so the big multiple could come in and cut the price to the extent that either alcohol or other products can be purchased from the multiple cheaper than they can be purchased from a traditional supplier or a cash and carry. That cannot continue so you have to have some level of intervention. The Grocery Order kept that level when it was in existence and maybe it’s a modern version of the Grocery Order that’s now actually needed."
The Oireachtas Joint Committee on Agriculture, Food and the Marine is currently examining the relationship between supermarkets and primary and secondary food producers. Several retailers, symbol groups, producers and co-ops have made presentations to the committee on the issues. Fianna Fail spokesperson for agriculture, Éamon Ó’Cuív, says there is an issue that needs to be addressed regarding standards and codes. "This has been on the agenda for different sessions but legislation gets held up. The Taoiseach has promised me absolutely that we would see the bill before the end of this session. I’ve had discussions with many of the retail groups; they’ve been into the committee and what they seem to indicate is that they have their own codes. Well, I don’t accept that because maybe many of them have very high standards but I don’t think that’s uniform across the trade. There is an issue here."
Ó’Cuív is cautious about the wisdom is introducing a complicated, regulation-heavy code: "I don’t think we need a complicated code to protect companies that are bigger than the multiples, but I do think we need protections for our own supply chain of indigenous, high quality Irish food. It’s in our national interest to ensure that there’s a level playing pitch between various players and we particularly need to protect the smaller suppliers, for example: liquid milk, vegetables, fruit and so on. We have to see it in the term of this government; the question is how exactly we’re going to do it."
Market squeeze
The Irish grocery retail market is close to complete saturation with choice galore for the consumer, and a tough daily fight for business for retailers. The rise of the discount stores, the expansion of multiples and competitive pricing is slowly eroding the small independent retailer. McGuinness says price competition, while good for the consumer, is jeopardising the smaller retailer and their suppliers. "You see people now in general shopping at Aldi and Lidl because that’s where they get their best price and you see small grocery shops closing. You need to have some sort of arrangement within that system that gives the purchaser the right value but that, in certain products such as alcohol, that there is a floor beneath which the price cannot go. You’re trying to find the balance between what somebody can buy a head of cabbage or a pound of carrots for, to give the seller a reasonable profit and at the same time, the supplier into the chain, the farmer, gets a reasonable profit too." When asked if the multiples and symbol groups hold too much power in the market, McGuinness was absolute: "Of course they do because the purchase power is not there for the small grocer or operator and therefore the profit margins are not in it."
Ó’Cuív says producers are concerned about the prices they’re getting. "The committee is looking at the whole relationship between processors, suppliers and the retailer. What I feel is, we are concerned about price squeeze on suppliers and we do believe there is a need for an equal relationship. Now this mainly relates to milk, vegetables and fruits – products like that. I think it’s fair to say that probably the most powerful player in the market is the major retail groups, and then you have the processor and then the supplier."
Consumer confidence
Following on from the horsemeat saga, consumers are demanding transparency and traceability for the products that supermarkets sell. Ó’Cuív says while he felt the initial response from government was slow, he commended Minister for Agriculture, Simon Coveney, for his actions since the outbreak. "I think that the initial response was slow from the authorities when this became apparent as a problem but I have to say that I think now we’re getting to grips with it. I had argued for a long time that this was a European issue." Ó’Cuív says there will always be issues with food safety and the challenge for governments is how to respond appropriately: "Food scares are going to happen, there’s always going to be challenges there. No matter what the State does, it cannot legislate for people who flagrantly disobey the law or good practice. I think what the State can do, and has done generally, is respond rapidly and forcefully to anything that could compromise the quality of our food."
According to Ó’Cuív, Ireland’s response to the horsemeat crisis and the repercussions of the revelations on the Irish food industry are not necessarily negative. "I think it’ll now be seen that Ireland were the leaders here in identifying the problem and dealing with the problem and that’s the way we must be. It’s not so much guaranteed that there’ll never be an issue raised but that Ireland guarantees that when an issue is raised, it doesn’t try to sweep it under the carpet and it takes very, very stern action to ensure that any food products are not compromised." Ó’Cuív says the transparency of the Irish government on the issue of horsemeat contamination gives our produce credibility on the global markets, as well as ensuring consumer confidence at home: "I think by dealing with it effectively and by taking stern and appropriate action and by ensuring that further safeguards are put in place, I think the lasting impression that is left with the people that count is that Ireland is a good place to do business because we take these issues seriously and if we find that there is some deficiency in our system, that we rectify it."
He believes that the consumer will still choose Irish produce before imported products: "I would think that the ultimate, the most powerful weapon we have is that the consumer makes it absolutely clear that they want clear labelling, that they want to know exactly what they’re buying and that when they know what they’re buying that they give preference to home products."
Less talk, more action
Deputy McGuinness says the SME sector has been ignored by the government during the economic crisis and the industry needs support. The NFRN says 47,000 jobs have been lost in the grocery sector and 86% of stores have less than 10 people employed. McGuinness is concerned about the effect closures of small corner stores is having on local communities: "You can see in lots of places throughout the country now, shops that have traditionally been associated with the streets, through family names have closed and gone. That can’t be allowed to continue. The only sector in the economy that’s not being directly assisted in this way by the government is the retail sector."
McGuinness says there must be a combined effort to assist the retail sector which must include input from all sectors: "I think that if you were to look at the overall business approach by government in assisting business to develop and sustain itself, particularly in the retail sector, there is a need for a cross-departmental group, not overly formal or administrative heavy, that includes the stakeholders in enterprise to sit down and to deal with the wide ranging issues that are affecting business."
While the criticism of the government is expected, these are issues that have been affecting retailers for the last number of years, before the current government came into power. It is not confined to any one political party or coalition. The opposition has a number of credible suggestions; it remains to be seen if any of them will provide relief to retailers on the ground. For the moment, we await the publication of the proposed code of conduct, the new Lottery licence holder and a possible change in the rate structure for commercial businesses.
//ENDS//
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