Ireland’s Retail Sector & The Brexit-effect
This blog discusses the Irish retail sector at the present moment, what can stimulate growth in the sector, and the potential roadblocks to growth that could be caused by the impending Brexit.
Retail Sector Although growth in the retail sector has slowed, it still remains an important component of the Irish economy. In fact, the retail sector contributes over €7 billion euro in tax revenues, making it the biggest contributor to the Irish exchequer with ‘23% of total tax receipts in Ireland’. The sector generates over €30 billion euro in sales and it employs 14% of the Irish workforce. Consumer prices were down by 0.2% in the first half of 2017 because of deflation.
Stimulating Growth Ibec has identified ways in which the Irish retail sector can increase its competitiveness, stimulate growth and improve performance. Ingraining government support in the retail sector, by providing tax credits to improve the ‘online sales’ capability’, reducing the cost of regulatory compliance in the sector, providing training and education programmes to enhance retail service performance and by regenerating areas in Ireland that have been ‘devastated by the recession’, are just a few ways Ibec has identified to spur growth and performance in the industry.
Brexit-effect on the Irish Retail Sector There are several costs and regulatory implications for Irish retail due to Brexit. The drop in value of sterling after Brexit has had a negative effect on Irish retailers. In a time when “two-thirds of consumer spending online is fulfilled by businesses operating outside Ireland”, a weak sterling can continue to attract Irish consumers to UK businesses. After Brexit occurs, import prices for Irish retailers will be affected by exchange rate volatility. This exchange rate volatility could potentially discourage investment. Imports and the supply chain, in general, will be affected in ways other than prices: Product supply will be disrupted by Brexit enforced EU Customs controls, added supply chain costs for ‘product originating in or in transit through a non-EU territory’, and ‘regulatory divergence’ between jurisdictions will add costs for Irish retail businesses.
The retail sector in Ireland is facing challenges, whilst government associations attempt to stimulate growth and profitability in the sector through a number of different ways.
Sources: (RTE, BBC, IBEC, businessworld.ie, Business Insider)