RGDATA: Government needs to “mind the gap” facing businesses as costs spiral and consumer sentiment tumbles

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Retail businesses facing perfect storm of increasing operating costs at a time of reduced consumer spending

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13 September 2022 | 0

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RGDATA has called on the government to introduce an urgent action plan to tackle the extremely challenging operating conditions that are impacting on all SMEs and having a particularly negative impact on food retail businesses.

RGDATA represents 3,500 family-owned community-based food stores all of whom are experiencing rapid rises in operating costs, with increases in energy costs particularly pronounced for the sector.

Independent retail shops are high users of energy at peak times due to the need for constant refrigeration of chilled and frozen foods, as well as lighting and heating.  These increases are coming at a time when shops are facing a wide range of increasing operating costs, including food supply costs, increased staff costs, and while other costs remain stubbornly high, including the cost of insurance.

At the same time, hard pressed consumers are pulling back on expenditure as they too are meeting the same inflationary pressures as the businesses that serve them.

Tara Buckley, RGDATA director general said: “Family-owned retail businesses need the government to help them to mind the gap between increasing costs and reduced consumer expenditure over the cost of the coming months. It is vital that otherwise viable businesses are supported to weather the price hikes in energy that they will face over the coming months. And the government has a key role to play to ensure that meaningful measures to address cost pressures are introduced in Budget 2023.”

Buckley also said that there are a range of additional measures that the government can introduce to ensure that a high-cost environment does not spiral out of control and these need to be reflected in an all-of-government action plan.

In addition to helping businesses with cost pressures, there are four other concrete steps that the government can take to support the interests of businesses and consumers, including;

  1. Directing state owned companies to focus on keeping prices low rather than driving up prices – the State has a substantial presence in key sectors of the economy including energy, banking and transport – these companies need to manage their businesses in a way that does not burden consumers or SMEs.
  2. Regulators need to be active against price gouging and price signalling – extreme vigilance is required to ensure that competition is working effectively in the economy.

iii.            Moratorium on State Costs – the State needs to put a cap on any new State imposed costs in the coming months. Costs derived from new legal obligations, including compliance schemes need to be capped at this time.

  1. Budget 2023 should involve tax measures to tackle anticompetitive behaviours – some sectors of the economy are resistant to reducing charges and costs. For instance, the insurance sector has refused to reduce the cost of insurance despite a raft of new reforms. The government should signal the use of tax measures to compel some sectors to bring costs down, whether in the insurance, banking, or energy sectors.

Buckley said that this was a time for exceptional actions from government: “Exceptional challenges call for exceptional responses and RGDATA urges the government to adopt an active approach to helping to keep business costs down. Some of these steps can be taken by enterprises owned by the State directly, whereas others can be secured by financial supports, regulatory interventions, or taxation measures. Central co-ordination and guidance is required as many of these entities tend to operate in a silo and without regard for their broader positive impact.”

 

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