Growing costs undermining retail recovery – Retail Ireland
Retail Ireland, the Ibec group that represents the retail sector, has highlighted growing concern amongst retailers that the sector’s competitive position is being undermined as costs increase. In its latest Retail Monitor, the group identified particular concerns regarding Government controlled costs such as commercial rates, the minimum wage, and levies attached to utilities.
Retail Ireland Director Thomas Burke stated: “While retail sales values grew by 3.7% in the first half of 2017 compared to the same period in 2016, retailers remain cautious and uncertain about what the second half of the year will bring in terms of trading performance. With prices now below 2008 levels, retailers remain addicted to deep discounting as a means of driving footfall and additional spend. At the same time, we continue to see Government controlled input costs growing and retailers margins dwindling, threatening the very existence of certain high street brands.
“Budget 2018 will offer Government an opportunity to address these spiralling costs and a chance to support retailers who find themselves under growing pressure. In this post-Brexit era, control of costs and a focus on our competitiveness will be essential to sustain the recovery in Irish retail, and avoid placing the sector at a major competitive disadvantage compared to counterparts in Northern Ireland or pure play online-only retailers based in the UK”, Mr Burke said.
Retail Ireland said the upcoming budget should:
· Keep labour costs competitive:
- The recent recommendation to increase the National Minimum Wage will, if accepted, further increase labour costs at a time of heightened competitive pressure. The proposed increase would bring cumulative increases since January 2016 to over 10%.
· Continue to ease the tax burden on Irish consumers and retailers:
- Retain the 9% VAT rate which has supported certain retail categories, such as food service, newspaper sales and hairdressing and grow disposable consumer income through reductions in income tax.
· Support the modernisation of the retail sector:
- Retailers require support to establish a meaningful presence online and allow them to compete for the 75% of total online trade currently done with firms outside of the State. Government should introduce a scheme, based on the current R&D tax credit system, which would allow retailers to offset the cost of web developments against their VAT costs. They should also expand the upper limit on employment to 50 and turnover limit to €10 million for the online trading voucher.
· Invest in infrastructure and Brexit alleviation measures
- : Budget 2018 must put in place funds to support retailers in adapting their business to the worst impacts of Brexit. Increasing State spending on infrastructure and setting out a clear path of funding to deliver key infrastructure projects will be essential if we are to protect rural jobs and retailers along the border.