Reaction from trade to severe budget
Retailers relieved no extra excise placed on cigarettes and alcohol; yet the fuel increase and consumers' weaker spending power are causes for serious concern
15 December 2010
No sooner had Brian Lenihan finished delivering his budget speech than statements began emerging about the effect it was likely to have on the trade. While most were dismayed by it there were a few beacons of light that were acknowledged. Those in the trade are thankful that there was no extra excise placed on alcohol which will go some way to stemming cross-border shopping There was also no increase on the price of cigarettes. However other elements of the budget will affect the trade due to consumers having less money in their pockets.
Retail Ireland director Torlach Denihan admitted that is was very positive that excise on alcohol had not been increased but added that it would affect the trade in other ways. “The budget will reduce householders’ spending power and probably retail sales. The extent of the reduction in retail sales depends on how consumers react to both the budget, to their own employment prospects and to the fact that Ireland now depends on external financial assistance.”
NFRN Ireland president Joe Griffin also reacted to the budget and said that the new measures would greatly affect its members. “Lack of a stimulus package, increases in employer PRSI contributions and a reduction in consumers’ disposable income will hit retailers’ already stretched cash flow.
“Small businesses need a support model to give them confidence in their future. With no protection programme or stimulus package and no ombudsman for small businesses what support do we have from Government?” He said that is was hard to envisage anything other than further job losses next year.
There was some comfort in the lack of an increase in tobacco excise duty according to Griffin. “As NFRN Ireland has highlighted on many occasions this would have only served to fuel the illicit trade. For retailers who sell alcohol the lack of an increase in duty was also welcomed although the rates are still so high it is difficult to compete against cross border retailers.”
The increase in fuel will also be taking money out of customer’s pockets. Commenting on this, forecourt retailer Martin Mulligan said: “At a margin of just under 2% there is little or no profit for retailers who sell fuel. Our low margin products retail at extremely high prices meaning the consumer spend contributes to turnover not profit”.
Social welfare recipients were hit quite hard and considering many retailer’s customers are currently on welfare this will indirectly adversely affect profit margins. Tipperary retailer Michael Mc Dermott said: “Generally speaking the vast majority of social welfare benefits are spent in the local community and therefore go back out into the economy, this measure will serve to reduce expenditure in shops”.