The Consumers’ Association of Ireland has said it strongly suspects that the full benefits of the over 13% surge in the value of the euro against the sterling in the past year are not being passed onto Irish shoppers in lower prices.
The association said it wants to highlight that consumers may think that they are securing low prices but that “history is repeating itself” in that the many food and goods shipped directly across the Irish Sea from Britain should be substantially cheaper following the unprecedented surge in the euro since the UK’s vote to quit the EU just over a year ago.
Dermott Jewell, the policy and council adviser at the consumer organisation, told the Irish Examiner that food and drink items imported on a large scale directly into Irish shops from Britain should have fallen steeply.
The comments come as CSO figures for the 12 months through June — almost exactly matching the period since the Brexit vote a year ago — showed consumer prices overall posted a modest annual fall of 0.4%.
The foods and non-alcoholic drinks category, which covers almost 60 individual items fell by only 2.7% in the year, while breakfast cereals, a benchmark for goods that are imported directly from Britain, fell by just over 4%. “Not for the first time history is repeating itself,” said Mr Jewell. “Before we had the recession, consumers were not getting a fair or reasonable exchange rate. The Republic was always paying a margin gap and retailers and distributors were taking the profit. We are again taking the position as subsidisers.”
He said that the 2.7% fall in food and beverage prices since June 2016 was “small”.
“The more consumers understand it the better, particularly as Brexit negotiations begin to bring specifics to the discussion,” Mr Jewell said.
The euro has surged to over 88p from 76p, on the eve of the UK referendum on June 23 last year.
Alan McQuaid, chief economist at Merrion Capital, said it has long been argued that businesses faced additional costs in the Republic which justified charging higher prices. But “the temptation” is likely that businesses were not passing on the benefits of the exchange rate, he said, adding that with so many goods imported from Britain that prices in the Republic should be much lower given the extent of the appreciation of the euro against sterling.
In a new Central Bank publication, economists Paul Reddan and Jonathan Rice highlighted the significance of the euro-sterling exchange rate in setting Irish consumer prices. “Sterling has a disproportionately large impact on Irish consumer goods prices, above and beyond other currencies, given the UK’s role as a key trade partner for consumer goods,” the economists wrote.
“A large quantity of goods imported from the US, particularly pharmaceuticals and aircraft, are not consumed in Ireland, while 50% of total manufacturing goods and 78% of food, beverages and tobacco imported from outside the euro area come from the UK,” according to the research.
“The Brexit-related fall in the value of sterling helps explain why Irish inflation remained lower than all other euro area countries throughout 2016. The falling cost of British exports meant Irish consumer goods prices have been particularly low and this has directly increased the real purchasing power of Irish consumers.”
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