Economists warn of threat to retailers

ABOLITION of the Groceries Order could seriously damage the Irish retail landscape top economists warned last night.

Friends First chief economist Jim Power said its removal was “inconsistent with the objectives of more balanced regional economic development.”

His condemnation of the removal of the order was fully backed by Marie Hunt, CB Richard Ellis Gunne director of research.

“I think it will certainly have an impact on the retail sector in this country,” she said.

It paved the way for the big multiples to gain an even bigger market share and will force independent retailers, who are the heart and soul of many provincial and rural towns in this country, “out of business in the long term,” she said

“Socially this could be a very unwelcome move for the Irish economy,” she warned.

Apart from that major concern Mr Power remains bullish about the Irish economy and about the property market.

Prices will rise by 8% and not the 6% as he previously thought. There will be “no hard landing” either for the sector and Mr Power believes demand for the next 10 years could run to 50,000 houses per annum.

If the housing market eases off as it inevitably will Mr Power said the government’s €34 billion infrastructure plan will take up any slack created by the fall off in housing demand.

Employment is also buoyant and up by over 5% in the 12 months to end June. Construction accounted for over 36,000 of the 93,000 hike in jobs with financial services contributing over 20,0000. Some 24,000 were generated across the public sector, which continues to add jobs despite an alleged recruitment ban.

Compared to a few months back Mr Power said the overall view of the economy is less rosy than it was.

Manufacturing and exports are under pressure and falling productivity is a big issue.

As a result some reduction in growth from earlier forecasts has been made and Mr Power says the ESRI’s forecast of 5% plus is too optimistic at this stage.

Even with the few caveats about productivity and exports the Friends First economist says Finance Minister Brian Cowen is looking at a give away Budget. He will have up to €2.5bn to disperse in his 7 December Budget, making it the most generous in the State’s history.

“Childcare is likely to be the headline grabber this year, just as disability was last year and decentralisation was the previous year. How much the Minister gives away in increased spending will be determined by his targeted deficit. He can afford to give anything up to €2.5bn away which allows for a very generous budget day package,” he said.

But issues of concern remain. Mr Power said the dip in corporate tax suggests the small indigenous sector of Irish industry was under severe pressure.

That has to be corrected. Foreign direct investment is waning and Irish industry will have to take up the slack, he said.