MATT COOPER: Retail giant says it will create 750 jobs — but at what cost to others?

SUPERMARKET giant Tesco’s announcement this week that it is expanding its Irish operations — and would create nearly 750 new jobs in the process of investing about €113 million — seemed like a shining light amid all the economic gloom.

Tesco is not just any supermarket retailer but one of the world’s biggest and most profitable: it would be good news seemingly for the country if a company so focused on profit believes Ireland, with high unemployment, rising emigration and depressed incomes, is still a place where it can get a good return on its investment.

Other retailers, such as Aldi and Lidl, have been opening new outlets too, as consumers have shown a willingness to shop around, seeking better value for money wherever possible. At first glance it would seem to be win/win: more jobs and keener prices and greater choice for consumers.

But on closer scrutiny, it is not all good news. The economic situation of the country being so obviously bad, it is clear Tesco does not necessarily see a growing market to exploit but is aggressively targeting existing competitors to take market share from them. That has consequences.

After all, Tesco has admitted its sales in Ireland in the year to the end of February 2010 fell by 7.5%, to a still enormous €2.9bn. Tesco does not reveal its profits in Ireland, instead including them in its British figures, even though this is a different jurisdiction that operates in a different currency. Stockbroker analysts have estimated Tesco makes a bigger percentage profit on sales in Ireland than anywhere else in the world.

This means the country is unlikely to benefit from 750 net new jobs. Instead, many jobs are going to be lost by other retailers as they struggle in the face of Tesco’s size, buying power and ability to undercut competitors by offering lower prices, temporarily at least.

Tesco also enjoys location advantages because of lax planning controls. It has a strategy of building large-scale premises at out-of-town locations, benefiting in particular from the better car parking opportunities that are available.

But custom is sucked from town centres, and it is not just food retailers who are troubled. Tesco offers a limited selection of clothes, music and household goods in many stores, again taking custom away from those who might supply a greater range but at a higher price, something they are no longer able to do if they lose the most obvious business. Once Tesco obliterates the competition what is there to stop it from putting prices to consumers up again?

As it happens, the IFA has been highlighting the extraordinary discrepancy between the prices Tesco pays suppliers for their goods and the prices then charged to shoppers. Worse, it has pointed out that very often foreign produce is available in Tesco’s Irish shops. Many suppliers of dry goods have also found themselves excluded if they did not offer Tesco a good enough deal, one which many could not afford.

That is just the way business operates. Any other retailer would behave just like Tesco if they could get away with it. It is an issue of regulation and competition. But when the Government sends a minister, Batt O’Keeffe, to the announcement of Tesco’s investment and he lauds it to the hilt — the creation of 750 new jobs being too good a public relations opportunity to ignore — then Tesco can be confident that the impact of its actions will be ignored and that it can carry on in its merry way.

*Whatever about Tesco’s commitment to the Irish market, another form of multinational has decided to steer well clear of Ireland: the foreign-owned banks.

This is a very worrying development. It means we are left with just our two main banks — AIB and Bank of Ireland — and as we have seen this week the Government has had to force them into lending to small business because, quite simply, they have not been doing enough of it, no matter what they might claim.

Both have problems with access to funds to lend which you might think presents better funded foreign banks with an opportunity to prosper at their expense. And while they do have problems too, most are not as badly off as ours.

The attitude of the foreign banks towards Ireland is highly instructive: most are not inclined to new lending if at all possible, partly because of the losses they have incurred to date and partly because they are not confident that any new lending will be profitable for them. It is the latter bit that is most instructive.

For example, Bank of Scotland (Ireland), trading as Halifax, has closed its personal business and might be inclined also to sell or close its business operations in the future. If it saw Ireland as a place to make profits by lending, it would do so. But it doesn’t. Neither does the Danish-owned National Irish Bank see much future here. It has not abandoned us, but it has scaled back operations dramatically. Rabobank, the Dutch owner of ACCBank, clearly regrets the damage its investment in Ireland has brought upon it. Again though, instead of merely dealing with historical issues, it seems reluctant to lend too much in the Irish market. Ulster Bank, as part of the RBS Group, long had ambitions to be the “third force” in Irish banking, but even it seems reluctant about trying to grab market share in this part of the island at present.

That means we have to rely again on the two main banks for funding our businesses, our job creators. Both are clearly struggling to fulfil the remit set down by government after the introduction of the bank guarantee that saved them from collapse, which is to give us a “fully functioning” banking system. Help will not come from foreign competition.

THE old saying that we get the politicians we deserve — because, after all, we elect them — may need some revisiting in light of the Ivor Callely affair. We hardly deserve Callely when you consider no one elected him to serve as a senator. He was appointed by Bertie Ahern, having been ousted from his Dáil seat by the voters of Dublin North East and having failed in his attempt to be elected to the Seanad by its gerrymandered constituency. This lack of elected mandate famously didn’t stop him from claiming €80,000 in expenses for driving from his holiday home in west Cork to his place of part-time work.

As the Irish Examiner revealed earlier this week he had a remarkably cavalier attitude towards the use of public funds during his time as a junior minister: interior decorating is clearly a passion of his, especially when he is not paying the bills. If it wasn’t his office he wanted kitted out at someone else’s expense, then it was his own home, although at least that came out of a private citizen’s pocket.

Callely’s greed has been well documented by now. But what is really becoming clear is that the democratic mandate of the Seanad is deeply flawed. Not only is Callely appointed, along with 10 others who found favour with Bertie Ahern, but the remainder come from a very narrow group of voters. As an NUI graduate I would be entitled to a vote, but I choose not to do so — ever. An election that discriminates against non-graduates is not worth one stroke of a pencil.

The Last Word with Matt Cooper is on 100-102 Today FM, Monday to Friday, 4.30pm to 7pm. If you want to contact him on Twitter, his address is cooper_m.


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