Fears for retail jobs as shoppers hoard €94bn
Nearly 85pc of consumers reveal spending curbs
Fearful consumers now have about €94bn lodged on deposit in a stubborn retrenchment heightened by the new Universal Social Charge (USC) that could cost 30,000 retail jobs.
The Sunday Independent has learned that retail sales in February were down as much as 20 to 30 per cent on last year.
Dave Fitzsimons of Retail Excellence Ireland, said: "From February 1, the real economy shut down. There was a massive decline in consumer spending. The USC has really impacted heavily.
"There are guys down 20 and 30 per cent on February 2010, which is just ridiculous. We are in a cycle of decline as a country. This is the 39th consecutive month of decline."
This decline was also underlined by Sunday Independent/Quantum Research telephone poll, which revealed that 83 per cent of people have curtailed normal spending.
Many respondents said they didn't have money to spend because of pay cuts and tax increases, while some blamed joblessness.
"We spent all our money on a house which we will never be able to pay back, so there is no such thing as 'normal' spending," was the bleak summary of one female respondent.
Just 17 per cent said their spending had not been curtailed by the downturn.
Nor is there confidence the Fine Gael-Labour administration will make a difference. In all, 81 per cent said the arrival of the Government led by Enda Kenny would not persuade them to resume normal spending activity.
Many respondents said economic conditions would have to show signs of improvement before they could be persuaded to spend more. "You can't spend it if you don't have it," said one Dublin respondent.
On Friday, the Arcadia Group -- which includes Topshop, Topman, Evans, Dorothy Perkins and Burton -- announced that profits from its Irish stores in 2010 fell 84 per cent to €2m on the previous financial year. Arcadia employs about 900 full- and part-time workers here.
Arcadia described gross profits across the Irish outlets as "markedly lower" and said "all brands found trading conditions in Ireland extremely difficult."
Significantly, the company blamed the 14 per cent decline in turnover on consumers cutting back on discretionary spending, while high levels of youth unemployment meant that its target market simply didn't have cash for clothes.
But there are some positives on the horizon with the arrival of the new Cabinet.
"We hope there will be a newfound optimism and that some of the fiscal strategy, which we hope will be implemented as soon as possible, will help," said Mr Fitzsimons.
"The reduction in the PRSI rate will make it far easier for employers to hire, especially in retail . . . because it will apply to workers earning less than €356 a week. Halving employers' PRSI is a good incentive."
Ireland's retail industry has already shed 44,000 job in the past 30 months and thousands more at risk. The sector is one of Ireland's largest employers, with 240,00 on the payroll.
Last week, it was reported that retail sales increased by 4.6 per cent in January compared to the same month in 2010, but that figure included buoyant new car sales. The comparison is also misleading because of the prolonged cold spell in January 2010.
Department stores, for example, posted a 9.3 per cent decline in the volume of retail sales on January last year -- but last week many retailers began fighting back.
Arnotts held a half-price sale at a warehouse near Dublin airport last week that attracted more than 1,000 shoppers -- with 45-minute queues at the checkouts as they bought half-price furniture, beds and electrical goods.
Clerys also discounted heavily in a sale at its recently refurbished O'Connell street store, and ran a number of Irish-themed promotions to bring shoppers through the doors of the iconic outlet.
"We cannot keep going down. We have to get to a point, hopefully in the middle of this year, when we reach the like-for-like growth and that will change the psyche of the business owner, the retailer -- of everyone really. That means you can stop the slashing and burning, and start thinking about moving forward," Mr Fitzsimons said.
However, a Retail Excellence Ireland survey found that 56 per cent of retailers rated their prospects as 'poor or very poor'. Another 27 per cent rated them as 'average', while only 17 per cent ranked their prospects as 'good', from March to May. A majority, meanwhile, expected profits to decline in the first five months of the year.
"Only 3 per cent of respondents expected employee numbers to increase, with 43 per cent expecting to reduce employment in the next three months," Retail Excellence Ireland director Torlach Denihan added.
The group warned yesterday that if the sector is not prioritised by the incoming Government, 30,000 jobs could be at risk.
Employers' body IBEC, meanwhile, warned that pay levels in Ireland remain up to 20 per cent higher than our main trading partners.
Pay freezes are going to be the norm for 2011 and some firms are still cutting pay.
But while the Irish high street remains moribund and bereft of shoppers, there has been a remarkable rise in online activity.
"There has been significant growth in online shopping. the recession is an offline phenomenon. It's not happening on the internet," said Mr Fitzsimons.
Of course, online trading is a double-edged sword and opens the market here to outside competition. Major UK retailer John Lewis, which sells a huge variety of goods, announced last week that it will soon begin selling online to Ireland -- competing with mid-to-upmarket retailers.
But the high rate of savings here is a symptom of deep fears about the future. Nearly €40bn of the €94bn on deposit is in ultra-low interest rate accounts, with six of the major financial institutions paying less than 1 per cent on demand deposit accounts.
The new Government must act to increase confidence among ordinary people to convince them to loosen the purse strings. Tens of thousands of jobs depend on it.