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Cross-Border Shopping.

Dáil Éireann Debate, Tuesday - 15 December 2009

Tuesday, 15 December 2009

Questions (76)

Denis Naughten

Question:

88 Deputy Denis Naughten asked the Tánaiste and Minister for Enterprise, Trade and Employment the steps she is taking to address the leakage of trade north of the border; the further steps she is taking to address this issue in the short and medium term; and if she will make a statement on the matter. [46790/09]

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Written answers

Whilst undoubtedly the single market offers opportunities to Irish consumers to shop anywhere within the European Union, the reality is that the majority of cross border shopping by Irish consumers occurs in Northern Ireland, which is not unexpected given our common land border and the current weakness of sterling against the Euro. The Government fully recognises the difficulties currently being faced by retailers and other businesses as an inevitable consequence of the current difficult economic climate and the importance of ensuring that we continue to have a viable and successful enterprise sector. It is all the more important in these difficult times that businesses, particularly those with a direct presence in the marketplace, ensure that they present as competitive an offering to the trade and the public as possible.

Over the past few months we have seen significant downward pressure on costs and on prices generally. Both the NCB Manufacturing and Services Purchasing Managers' Indices have shown a sustained and deep period of declining input costs for businesses in Ireland, driven, in part, by lower wage costs. This is matched by Consumer Price Index returns from the Central Statistics Office, which show that overall prices in Ireland fell by 6.6% in the year to October 2009. This compares with a fall of only 0.8 % in the UK for the same period. At the European level, the EU Harmonised Index of Consumer Prices, which is accepted as the most appropriate measure for community wide price comparisons, shows that in the year to August 2009 there was a fall of 2.4% in prices in Ireland as compared with an increase in prices of 0.6% throughout the EU as a whole.

The above returns clearly show that prices are falling more rapidly in Ireland than in Northern Ireland, the UK and in the EU as a whole. This narrowing in the differential in prices is very much to be welcomed and clearly will help the competitiveness of Irish businesses. The ESRI recently predicted that, with our current control of costs, productivity should grow by over 3 per cent in 2010. Combined with projected wage decreases of 2.5 per cent, this represents a significant improvement in the competitiveness of the Irish economy.

The Government decisions announced in last week's budget, relating to the reduction in the rate of VAT and also the reduction of duty on certain alcohol products will further enhance the competitive position of Irish retailers. An additional significant factor in helping to balance prices in the two jurisdictions will be the decision of the UK Government, as announced in the Pre Budget Report speech of their Chancellor of the Exchequer last week, that the temporary reduction in the UK VAT rate is being reversed with effect for 1 January 2010, so that the rate will revert to the former level of 17.5%.

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