Retail Summit: Sterling collapse heaps pressures on sector

Thursday, 6 October 2016
Retail Ireland, the Ibec group that represents the retail sector, will today warn that a confluence of external pressures could derail the sector's fragile recovery during the crucial Christmas period. At the sector's major annual conference in the Guinness Storehouse, Dublin, the group will warn that the immediate pressure of the sterling collapse risks driving consumers north of the border and online. The budget must address the Brexit challenge head on and support growth. It must reduce the punitive tax burden on consumers to support the domestic recovery and ensure no measures add to already high business costs. Labour costs must reflect the needs of business to compete successfully in a highly competitive market.

The Retail Summit brings together the country's top retailers and this year will be addressed by renowned futurist and author Patrick Dixon, Musgrave CEO Chris Martin and Tony Wheeler, Head of Branch, Peter Jones – John Lewis.

Addressing the Summit, Retail Ireland Director Thomas Burke will say: "The retail sector is only getting back on its feet following the crisis years. Total employment in the economy is 10% higher than it was four years ago, but retail employment is only 2% higher. This emerging recovery is now vulnerable. Despite intense retail competition and falling prices, Brexit has unnerved consumers and currency pressures risk sending shoppers north of the border or online. Retailers are doing everything within their power to facedown the challenge and ensure prices stay low, but the government has a crucial role to play.

Retail Ireland said the upcoming budget should:
  • Continue to ease tax burden on Irish consumers: Ireland has one of the highest marginal tax rates in Europe and it kicks in at earnings below the national average. This entry point should be increased in line with wage growth.
  • Keep labour costs competitive: Minimum wage in Ireland is currently 12% higher than the UK. Given the labour-intensive nature of retail, the current recommendation by the Low Pay Commission to increase the National Minimum Wage will, if accepted, further increase labour costs at a time of heightened competitive pressure. The proposed increase follows a 6% rise earlier this year.
  • Establish a Town Centre Fund: While retail activity has picked up, vacancy rates in key towns and cities remain high. The growth of online shopping along with under investment in the public realm, street scape and shop fronts have reduced footfall in key shopping districts. A competitive tendering process for towns and cities around the country to access funding to support the regeneration/development of their town/city is required.

At the Summit, Mr Burke will highlight the increasing challenge of intense online competition, which has been heightened by currency movements. "Online retail is an increasingly important channel, with over 50% of Irish consumers having made an online purchase in the past 12 months. In 2015 the total value of online purchases by Irish consumers was €9.1 billion, with clothes, sporting goods and books the most popular items purchased.

"The Irish online retail offering has improved significantly over recent years on foot of major investment. Despite this, over 70% of total online sales revenue leaves the State. The emergence of other sales platforms in recent years such as click and collect and home delivery has greatly increased convenience for consumer, but has proven logistically and financially challenging for Irish retailers. Investment in these platforms has not been easy with margins tight and capital investment opportunities constrained by limited credit availability. The sector is now firmly focused on this challenge."