Monday 24 July 2017

Co-op's 'keep it British' publicity stunt hasn't got any real meat

British retailer Co-op Group announced that it would adopt a British-only fresh meat policy at its 2,000 stores across the UK.
British retailer Co-op Group announced that it would adopt a British-only fresh meat policy at its 2,000 stores across the UK.
Richard Curran

Richard Curran

It sounded like the biggest snub to Irish beef in 20 years. Not since Russia decided to refuse beef from three counties of Ireland because of BSE in the late 1990s had there been such an affront to Irish meat exporters.

I am talking about that publicity stunt by British retailer Co-op Group, when it announced that it would adopt a British-only fresh meat policy at its 2,000 stores across the UK.

It looked like a reopening of De Valera's economic war of the 1930s, particularly in a week of claim and counter-claim over who said what at a dinner at No 10 Downing Street. Throw in British Prime Minister Theresa May's accusation that the EU was trying to influence the outcome of the UK general election, and it was an incendiary week.

But before we start panicking on farms across Ireland, it turns out that the Co-op Group doesn't sell any Irish fresh meat. And all of its fresh chicken, pork and beef is already completely sourced in the UK.

The marketing campaign will only see Co-op dropping Danish bacon and New Zealand lamb. Given that Co-op will continue to sell foreign meat in processed non-fresh products and the fact that it is a mutual company owned by British farmers, British customers and other British members, it is really just a clever publicity stunt.

The big fear for the Irish meat industry is that it could set a tone around Brexit that might spread to other retailers and other parts of British industry. Given that we export €4.4bn of food and drink to the UK every year, there is a lot at stake. Ireland buys 37pc of the food exported by the UK, amounting to around €3.3bn per year.

However, when you strip out the rhetoric, it shouldn't be cause for too much alarm - not yet anyway. The UK has long had a policy of providing cheap food and it sources so much from Ireland because we can deliver high traceability at an affordable cost.

We also have some very efficient and large meat-processing companies. How many of the burgers supplied to McDonald's and Burger King across the UK come from Ireland? Quite a few is the answer.

When the jingoism dies down, market forces will count. A hard Brexit deal which disadvantages Irish meat processors through high tariffs cannot be ruled out. But that will be based on the new trade deal to emerge rather than publicity stunts.

If I was running Co-operative Group, knowing that it is owned by its British members, of course, I would actively pursue policies that appear to benefit their interests the most. Tesco or Sainsbury's, which are publicly-quoted commercial companies with shareholders from all over the world, are a different matter.

Some of the nonsense being spouted by hard Brexiteers is difficult to take. Tim Martin, chairman of pub group JD Wetherspoon, has suggested that no trade deal with the EU might not be so bad, and the UK could always drop all import tariffs on goods coming into the country. He says this would drive down the cost of goods to consumers and stimulate the economy.

Unfortunately, Tim doesn't seem to have grasped what it might mean for domestic British producers of those products, such as farmers and the entire UK agriculture industry. Where will this kind of rubbish end?

As well as retail stores, Co-op Group owns over 1,000 funeral homes, perhaps it could say it is only going to bury British people.

Now may be the time to start worrying about the car tax

A disappointing performance on income tax receipts is exercising minds at the Department of Finance. With lots of jobs being created, the mandarins expected a lot more money to come from income tax receipts in the first four months of the year.

The revenue collected €6.17bn in income tax in the first four months of 2017, up €75m on the previous year. But there were 65,000 more people in employment at the end of 2016 than there were a year earlier, so they expected to rake in quite a bit more.

But perhaps more worrying is the dependence on Corporation Tax rises in recent years and the extra exchequer cream on top derived from massive new car sales which contribute VRT and Vat.

Corporation Tax receipts were €223m below profile after the first four months. They aren't big Corporation Tax paying months, but never the less it shows how tenuous they can be.

The exchequer's big boon on new car sales is a little more complicated. It gets VRT and Vat on new car sales. A sharp fall in new car sales in 2017 (down 7,000 in first quarter) has been partially offset by a massive rise in used car imports, where VRT also applies.

Used car imports, mainly from the UK, were up 56pc in the first quarter to 72,000. According to the SIMI quarterly review, the state took in €676m in VRT and Vat on new car sales in the first quarter of 2017. The tax take on used cars was around €76m, bringing the total to €752m, which was exactly the same as 2016 but with a different mix of new and used cars. The SIMI reckons the average tax take on a new car is €8,912 compared to €3,184 on used. The exchequer's VRT cash machine is set to deliver less as the year progresses and new car sales continue to fall.

Paddy Power merger bet fast turning into an accumulator

The bookies warned punters about Cheltenham this year, and sure enough the bookies had a good racing festival. However, reading Paddy Power Betfair's first quarter update, other clouds are on the horizon.

Chief executive Breon Corcoran delivered more strong figures and showed how well the merger between Paddy Power and Betfair is translating into profits. But significant competition in Europe is a factor in such a crowded sector. Switching app or website on your mobile is a lot easier than heading to a different bookies shop in the days of old.

A trading update from Ladbrokes Coral during the week showed how retail shops in the UK are proving difficult, too. Ladbrokes has attracted customers online, but is finding stakes placed in its shops are not as high as they were. Equally, the regulatory review on the future of betting terminals (FOBTs) in shops is still hanging over the industry. It has been delayed until after the general election.

An MPs' report was this week found to be in breach of parliamentary standards. A cross-party group of politicians, backed by casinos, amusement arcades and pubs, was deemed to have broken the rules four times in a report calling for the maximum stake on FOBTs to be reduced from £100 to £2.

The parliamentary commissioner said the breaches included a lack of transparency about free advice the group received from a public affairs firm employed by gambling companies that do not offer FOBTs.

Unfortunately, the issue has turned into a betting turf. Bookie shops are said to derive more than half of their revenue from the machines. Any loss on FOBT income in the UK could be offset by new acquisitions elsewhere. Paddy can easily afford it.

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