Price gap with North narrows but VAT hike impact sparks new fears
THE pay-off for shopping up north has plummeted in the past two years, but it could be set to rise again when the government announces a VAT hike tomorrow.
A survey by the Irish Independent has found that while small price differences remain on most items, they are a fraction of what they were two years ago.
However, tomorrow's expected VAT increase from 21pc to 23pc is set to widen the gap again, unless retailers down south absorb some or all of the hike.
Retail Ireland Director Torlach Denihan said the Government was "playing with fire" with the increase.
"A 2pc increase may not in itself be enough to drive people north to shop, but if they increase excise duty on alcohol as well and there is any negative change on exchange rates, it would be really dangerous," he said.
Our survey found that the current payoff for cross-Border shopping trips is small, particularly when you take into account the high cost of petrol and tolls to get there.
For popular cosmetics gifts at Debenhams, the price gaps were generally between 7pc and 10pc.
The biggest differential we found was for Gucci Guilty Intense perfume, with 30ml costing €36.81 (stg£31.66) in Debenhams' Newry branch on November 25, compared with €47.08 at their southern outlets.
Back in 2009, a similar survey found the price differential between Debenhams' prices north and south was above 40pc on most items.
Those wishing to buy an iPad 2 will not make any significant saving by travelling north as the price difference at PC World north and south is just 3pc -- €479 compared to €464 (£399) for the entry-level model.
The price gap at Argos, meanwhile, is generally less than 10pc for popular toy and gift items, and one of the nine items surveyed there was cheaper in the Republic.
For example, a Sony Bravia 32" TV retails at €442 (£379.99) in Argos Newry compared with €459.99 in Argos Dundalk -- a difference of just 3pc.
In a basket of goods at Dunnes Stores, seven items were cheaper in Dundalk than in Newry while 11 were dearer, although the differences were fairly insignificant.
By far the biggest price gap was for a tin of McVities Victoria biscuits -- which retailed at €14.99 in Dundalk compared with a standard price of €6.99 in Dunnes Newry (£5.99) and a temporary special offer there of just €4.65 (£4).
At Halfords the prices of car accessories and bikes were generally 3pc to 10pc dearer in Dundalk than in Newry -- though two of 10 items were marginally cheaper in the Republic.
A child's Apollo Spider mountain bike cost €139.99 in Halfords Dundalk compared with €127.90 ( £109.99) in Halfords Newry.
In general, the price differences for groceries and other items surveyed were significantly lower than in 2009, when there was a double-digit gap for most items.
This is due to a poorer exchange rate for cross-Border shoppers and a significant narrowing of the VAT gap between the two jurisdictions.
At its worst, the Irish VAT rate was put up to 21.5pc and the UK rate was slashed to 15pc, but the gap was narrowed to just 1pc last year, with top rates of 21pc and 20pc respectively.
However, this will widen again when the Government increases the top rate to 23pc -- a hike expected to take effect from January 1, 2012.
Retail Excellence Ireland said at the very least, the Government should phase the VAT hike in by 1pc next year and 1pc the following year.
"That way they could assess how it impacts on demand and if it sends people across the Border for big ticket items like white goods," said REI Chief Executive David Fitzsimons.
A lull in cross-Border shopping combined with weak domestic demand has seen Northern Ireland retail footfall drop by 5pc this year, according to the latest British Retail Consortium figures from August to October.
Ikea's Belfast store, which was once a magnet for southern shoppers, has lost out hugely since the furniture chain opened a Dublin outlet in 2009. And the chain admitted recently that trading conditions there were "challenging".