Retail spending to fall at least 6%

CONSUMER spending will fall by a minimum of 6%-7% this year in the aftermath of Tuesday’s emergency Budget, Retail Ireland warned yesterday.

The IBEC-affiliated body — which represents members of the retail trade and had called for a reduction in the 21.5% VAT rate to 20%, in its pre-Budget submission — yesterday expressed disappointment that the rate is to remain unchanged for the foreseeable future. It did, however, welcome the fact that no further excise duty was placed on alcohol — another of the items on its pre-Budget wish list.

“We fully accept that the minister had to do something in order to balance the books and while a reduction in the VAT rate to 15% — to bring it in line with the British rate — would have been ideal, we knew that wasn’t a realistic possibility. But this Budget will hit disposable incomes and there will be a hit on consumer spending patterns,” Retail Ireland director Torlach Denihan said yesterday.

“We felt there could have been more emphasis put on cutting public spending rather than upping taxes. The biggest single issue, from a retail perspective, is that consumers will take a major hit from this Budget and a lot of spending power will be removed from their pockets,” he said.

Mr Denihan said the 6%-7% outlook for the decline in retail spending for 2009, as a whole, was a minimum forecast. “We were thinking around those percentages in the immediate run-up to the Budget, so when the dust settles we may even see a greater decline,” he commented.

Retail Ireland has already predicted that 25,000 more jobs will be lost in the sector before the end of this year.

It also said that the continuing trend of consumers going to the North to avail of the lower VAT rate on goods will continue.

Retail Ireland maintains this could cost the Exchequer far more than the e72m-e112m previously forecast by the Revenue Commissioners and the Central Statistics Office (CSO).

“The issue of consumers looking to the North to buy their goods is an ongoing concern and it’s probably true to say that the full extent of the cross-border trade problem has been underestimated.

“Approximately 3% of that fall-off in consumer spending will probably be in the form of people transferring their custom to across the border,” Mr Denihan said.


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