The Republic of Ireland and the EU have this week agreed an €80-90 billion (£68-76 billion) rescue package to help tackle the vast gaps in the Irish government’s finances, and this spells more bad news for the retail industry.
A four-year plan to cut €15 billion worth of debt has been drawn up by Prime Minister Brian Cowen and his Cabinet, which looks like it will have some impact on the health of retail in the country.
Torlach Denihan, Director of the sector’s representative body Retail Ireland, told Retail Gazette that the main issues that are likely to have an effect on trade include the commitment to increase VAT to 22 per cent in 2013 and by another one per cent the following year.
He also suggested that retail in Ireland has been in recession since 2008 anyway, with 47,000 jobs in the sector lost during that time.
“Turnover has also reduced by 20 per cent during that time, so retail finds itself in a very difficult situation at present,” he added.
With this week’s announcement that Ireland is being bailed out by the EU consumer confidence in the Emerald Isle must be low, but Denihan said the mood of the nation’s people will be clearer after the Budget on December 7th.
“Right now public reaction to the bailout is unclear, although people are spending less money,” he explained.
Uncertainty surrounding the Irish economy means there is the potential for retail to suffer its worst Christmas for a long time, and the Retail Ireland Director admits the festive season is going to be “very challenging”.
“However, we had the largest annual drop in sales last year so retailers have planned for Christmas and factored in the problems.
“The results of next month’s Budget will be critical.”
Quite often retail can prove surprisingly resilient in hard times, and the successful openings of fashion brands New Look and Forever 21 in Ireland in recent weeks show that businesses are willing to invest in the country.
Denihan added: “The biggest factor affecting consumer confidence is job security.
“If this improves, the retail industry’s fortunes could improve with it. If it doesn’t, we will continue to be in the doldrums.”