4|Retail News|July August 2013|www.retailnews.ie
www.retailnews.ie|July August 2013| Retail News |5
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Consumer Confidence the Key Concern as Budget Looms
IMPROVING consumer confidence is foremost on retailer wish-lists for Budget 2014. While retailers recognise the need for continued austerity, they want the Government to send a signal to consumers that the future is not bleak, so “they can loosen their purse strings and give themselves a life rather than living in fear of additional charges,” according to Vincent Jennings, CEO of the Convenience Stores & Newsagents Association (CSNA). Willie O’Byrne, Managing Director, BWG Foods, noted that previous budget cuts created a sense of uncertainty and fear. The build up to the property tax introduction, for example, unnerved consumers and stalled 2012 Christmas spending. “The same is true of water tax and other future taxes threatened,” warned O’Byrne. “BWG Foods would like to see such taxes articulated clearly and precisely at the earliest possible stage, leaving no room for speculation and scaremongering.” Avine McNally, Acting Director of the Small Firms Association (SFA), said the Government needs to deliver a clear message that there will not be further taxes or extra payments imposed upon consumers: “There should be some indication to give people the confidence to
go out and spend a bit more money than they would have in the past.” In its pre-Budget submission, RGDATA is calling for “a forensic examination of all Budgetary measures to ensure that they do not add to the cost of employment or hinder job retention/ job creation in the independent retail sector”, according to Director General, Tara Buckley. This includes urging the Government not to reintroduce the obsolete and unconstitutional Joint Labour Committee wage setting body, as well as calling for a 15% reduction in commercial rates and a cap on any increase in commercial rates as a result of the ongoing Revaluation process. “SMEs have had to cut their costs to survive, Local Authorities must do the same and pass on these savings in lower commercial rates,” Tara Buckley said. Local authorities also have a job to do in relation to town centre rejuvenation and lowering parking charges, according to RGDATA, who are calling for each Local Authority to have a dedicated Town Centre Team and for national guidance to ensure similar parking regimes across the country. Budget 2014 is expected to make €3.1 billion in adjustments, entailing €2 billion of spending cuts and €1.1 billion of tax increases, following €3.5 billion of adjustments in the last budget. IBEC has called for the government to drop €500m of planned tax hikes, a desire echoed by the grocery sector. “We believe there is scope to row back on the austerity agenda and use the €1 billion generated from the promissory note deal to mitigate the budget cuts originally earmarked for Budget 2013,” said Willie O’Byrne. Due to recent developments and initiatives, the sector is positive about what lies ahead. “I think this will be the last austerity budget and it will be communicated with authority and transparency,” said David Fitzsimons, CEO of Retail Excellence Ireland. “I think we can look forward to future budgets that will be less aggressive and more supportive. I think sentiment will continue to improve. We’re through the worst of the storm: onwards and upwards.” A degree of the positivity emanates from the timing of Budget 2014 on October 15. In recent years, budgets have been held in December, the peak time for consumer retail spending.
David Fitzsimons, CEO of Retail Excellence Ireland.
Willie O’Byrne, Managing Director, BWG Foods.
“We thank and praise the Minister for that decision,” said Vincent Jennings. “December always caused massive difficulties in the stock end of things. If there was bad news or negative feeling at a time of the largest sales period, it really reflects in our tills.” BWG also welcomed the change in Budget date: “It removes from the most critical selling season of the year the low consumer confidence generated from kite flying and media speculation as to the severity of austerity measures,” according to Willie O’Byrne. Nevertheless, retailers want a number of measures introduced in Budget 2014. At the forefront: Government-controlled costs of business, which can hamper competition as well as profitability. Rates, particularly in rural areas, are an ongoing issue. McNally highlights the cost of parking for small retail businesses throughout the country, which can dissuade people from shopping in town centres. Ireland’s energy and transport costs are amongst the highest in Europe. “There are other costs at local government level,” added Mark Fielding, CEO of the Irish Small and Medium Enterprises Association (ISME). “If you want to put two chairs and a table outside a deli, they are on top of you for all sorts of levies. If you want to put a sign up, there’s a charge.” RGDATA is calling for the introduction of a supplier code to stop utility providers compelling retailers to tie scarce capital up in the provision of a deposit in return for supply or service. Electricity charges appear skewed. “Bigger businesses are paying a little over 6% less than the EU average. Small and medium businesses are paying
exactly the same amount above the EU average. These figures were confirmed by Forfás recently,” said ISME’s Mark Fielding. Evelyn Jones, Chairperson of NOffLA, wants a reduction in employers PRSI: 10.75% for the off trade. Retailers are also calling for no increase on mandatory sick pay or pension provision. “If you’re trying to create employment and make sure small businesses are creating jobs, you can’t keep putting the cost back onto employers,” said McNally. “They won’t take on people. They’ll just either retain staff or, if the cost gets too high, they may reduce hours or make people redundant. This has to follow through on the Government’s stance of job creation.” Incentives for the industry include SME tax incentives and benefits. Retail Excellence Ireland, for example,
want micro-initiatives such as rewarding retailers who implement a labour intensive business model. “It’s the difference between a Tesco Extra, which invests about 5.5% of turnover in salaries, versus the retailers who invest 14% or 15%,” said Fitzsimons. “It allows for a reward to be given to employers who invest a significant proportion of turnover in labour costs.” In June, Minister for Social Protection, Joan Burton TD, proposed increasing the minimum wage, sending shockwaves throughout the
Mark Fielding, CEO of the Irish Small and Medium Enterprises Association (ISME).
retail sector. Minister for Jobs, Enterprise & Innovation, Richard Bruton TD has since denied he has any plans to do so, but the industry condemned Burton for untoward kite-flying. Burton’s Jobs Plus scheme, which rewards employers for hiring candidates unemployed for a year
or more, has had a largely warm reception, though. Previously, the social welfare system was notoriously inflexible. BWG Foods’ Willie O’Byrne welcomed the programme as “particularly helpful to the retail sector”, although the CSNA’s Jennings said the scheme was restrictive: “Why shouldn’t I also be able to hire someone six months out of work?” While welcoming the lower rate of PRSI applicable to new employees under the Employer Job (PRSI) incentive scheme as “a very important tool for the creation of new employment in the retail grocery trade”, RGDATA Director General Tara Buckley wants the Government, when considering any new schemes, to consult with the independent retail sector “to seek our views on how to tailor the scheme to make it cost effective and ensure that the right people are targeted to train to work in the convenience retail sector”. Retailers are calling for a freeze on taxes and duties in Budget 2014. “We’re taxed to death,” said Retail Ireland Chairman, Frank Gleeson. “No more VAT increases or duty increases. We can’t afford them.” This includes a freeze on hikes on cigarette excise. “We’ve reached the stage of diminishing return. Any more tax on tobacco will lead to
more black market activity.” Jennings concurred: “Even the Department of Finance issued a paper that showed we had already reached the level of diminishing returns on tobacco, so you’re not doing it from a revenue raising perspective.” Off license sales suffered from excise hikes in the last budget, which imposed a 41% increase on wine (an additional €1 excise duty on bottles), 22% on beer and cider, and 18% increase on spirits. “We’re looking for a reversal on the 2013 increases because they’re not yielding the revenue they were supposed to,” said NOffLA’s Evelyn Jones. “75% of our members stated they were experiencing volume decline in their businesses. 10 independent off licences closed this year. Volumes are down on wine by 9.8%, beer 13%, spirits 16.3% and cider 16.3%. They expected to raise €180m. Between January and May, they only raised €29m.” Despite such concerns, industry representatives we spoke to are broadly positive about the future. “I went to a global economic forum in Madrid two weeks ago,” said Gleeson. ”Everybody is optimistic about Ireland. They take an objective view that we seem to be doing all the right things.” This positivity now needs to be reflected in Budget 2014.
“Crack the Whip on Banks”: RGDATA RGDATA has urged the Government to scrutinize the impact that changes in banking terms and conditions may have on creating and sustaining jobs in the retail sector. Speaking to the Government’s Interdepartmental Group which is tasked with progressing the Action Plan for Jobs 2013 in the retail sector, an RGDATA delegation called for state action on banking fees. “The Action Plan for Jobs will not be delivered unless the Government is prepared to crack the whip on the banks,” warned RGDATA Director General, Tara Buckley. “Recent increases in bank lodgement fees and other changes aimed at making banks more efficient are having a direct impact on our members, their security and the security of their staff and
families.” The delegation from RGDATA, including Dundalk retailer and RGDATA Director Colin Fee and second generation retailer Hugh Doyle of Donnybrook Fair in Dublin, also outlined other issues impacting on competitiveness for independent retailers. Colin Fee urged the group to consider the impact any reintroduction of the JLC wage regime would have on job retention and creation. He also called for the enforcement of regulatory requirements to stop competitors operating outside the law. Hugh Doyle spoke of employment initiatives and locational incentives for retailers based in town centres. He also suggested a scheme to allow retailers to expand their businesses without immediate development contributions.
RGDATA member Hugh Doyle of Donnybrook Fair, Tara Buckley, Director General, RGDATA, and RGDATA Director Colin Fee are pictured outside the Department of Jobs, Enterprise & Innovation after meeting with the Government’s Interdepartmental Group tasked with progressing the Action Plan for Jobs 2013 in the retail sector.