The economic suicide being committed by the Irish Government in the form of the punitive 21.5pc VAT rates needs to stop at once, the head of DSG in Ireland said, revealing Currys electronics stores in Northern Ireland (NI) will gain €12m from shoppers from the Republic flocking North.
It has been acknowledged that in the crucial Christmas season, some €700m from the Republic was spent in NI shopping hotspots such as Enniskillen and Newry.
But add VAT to this, and the loss to the Irish economy well exceeds €1bn from that season alone, with the problem continuing unarrested, warned DSG retail managing director, Declan Ronayne.
DSG owns Currys and PC World, which is active in Ireland and the UK and in Europe. Its subsidiary Currys, which employs 400 people in the Republic across 19 stores, said its sister stores in Derry, Enniskillen and Newry alone will take in excess of €12m out of the Irish economy this year, representing more than €2m in lost VAT income to the Irish people.
At a time when the ESRI is predicting unemployment to grow by 300,000 by next year, Ronayne said that some of these lost jobs will undoubtedly be in retail because of the VAT rate.
He said the lack of understanding of what’s happening to Irish retailers is shocking.
In a statement this morning, Ronayne explained: “Sitting on the sidelines offering uninformed spin and doing nothing as trade migrates to the North is not good enough.
“People are voting with their feet and no Government can afford to ignore that. Cutting the VAT rate will help to stem the flow of this income out of Ireland by allowing retailers to compete more effectively with Northern Ireland and offer consumers in the Republic a better deal.”
Speaking with siliconrepublic.com, Ronayne urged the Government to immediately move to reduce the VAT rate to 18pc to buoy up the economy.
He said retailers are being blamed for the high cost of living in a Republic blighted by the current recession, but the reality is that most have reduced costs everywhere possible.
“They have reduced every discretionary spend, they haven’t replaced staff and staff have taken pay cuts.”
Ronayne said the other argument is the question of currency hedging. Until now, the Irish economy has been hamstrung by a fixed exchange contract with sterling.
“Now that it has ended, retailers will try to pass on the savings to the consumer, but these won’t be enough. Every retailer right now is focused on value, and where they have an opportunity to pass on savings, they will. The fundamental point is this is not going to be enough.
“The massive VAT difference is going to be punitive and jobs in the retail sector won’t be sustained if people continue to go North.
“The Government can’t be blaming retailers, it has to do something,” Ronayne added, saying a golden opportunity was lost in the recent supplementary budget.
Currys, in an effort to alleviate the pressure on shoppers in the Republic and bring value into the market, said today that it will be launching its ‘UK VAT range’ price promotion for the month of May.
Over 200 product lines representing 50pc of Currys stock will be sold at prices that match the UK VAT rate. Currys said it will closely track the euro/sterling buying rate during the month of May.
“The Irish Government has to realise that currency hedging doesn’t work and it is only driving people North. As a country, we need to stop attacking and blaming each other and get on with the job,” Ronayne said.
“We don’t want strategy groups, focus groups or more useless reports.
“As a retailer, I know what needs to be done. Retailers are doing what needs to be done. It’s time the Government did something.”
Ronayne advocated an 18pc VAT rate, rather than a drastic measure of 15pc.
“We don’t accept the notion that the Government can’t reduce VAT because its finances are in peril. This is about the future of business in this country. We urgently need to stimulate consumption.”
Ronayne concluded: “Retailers sitting on their hands and being afraid to talk about it no longer works. We just want action.”
By John Kennedy
Pictured: Storefront of Currys outlet (Image reproduced with permission from DSG International)