Government strategy could cost thousands of jobs, retailers warn
Businesses nationwide join forces in a new lobby group to call for urgent reform of 'crippling' commercial rates
Published 11/09/2011 | 05:00
Sky-high commercial rates, upward-only rents and consumers so shell-shocked by the Government's controversial austerity strategy that they are too afraid to spend, may cost tens of thousands of jobs in the next few months, retailers have warned.
As some 30,000 businesses head into the critical Christmas shopping period, which will make or break many small enterprises, business owners fear they are heading into a fourth consecutive year in which personal spending declines in real terms.
Last week, a major new campaign got under way to lobby for urgent reform of one of the biggest fixed costs faced by crisis-hit retailers -- commercial rates.
Irish Employers for Affordable Rates (IEAR), the national organisation launched last week to secure major reform of the commercial rates system, claims it represents the biggest ever business lobby to present a case to government.
According to its chairman John Conran, IEAR represents some 30,000 businesses nationwide with 500,000 employees and their families. He said this was the first time that virtually every business and commercial organisation had joined forces on a single issue, highlighting the damaging impact of commercial rates.
"If companies are forced to close because they can not pay rates, each unemployed person will put a burden of €20,000 on the State. Reducing the rates burden will stimulate employment," he said.
Rates levied on businesses by local authorities have increased by 47 per cent over the last 10 years and now amount to an annual charge on business of €1.35bn, the lobby groups says.
The new initiative came as retail remained gloomy in July. The end of the Government's scrappage scheme meant that sales of new cars "fell off a cliff", according to senior figure in the motoring trade.
The volume of sales fell 0.5 per cent compared to June and 0.6 per cent annually, Central Statistics Office figures showed.
There was, however, some upward movement in the volume of core retail sales (excluding cars), rising by 0.5 per cent.
Employers' body Ibec suggested that an increase in the number of tourists coming here had helped improve the figures.
Overall, however, it has been a bad year, according to Ibec economist Reetta Suonpera, notwithstanding that the summer months had proved "somewhat less grim" than the first quarter.
"It is likely that the improved tourism numbers have provided some small boost for the sector. The recovery in bar sales would certainly point in that direction," she said. Bar sales rose 3.3 per cent in July -- albeit from a low base.
But consumer confidence is shattered.
"All government decisions should be assessed for the impact they will have on the domestic economy. The forthcoming Budget in particular should be designed to cause the least damage to growth," she said.
IEAR was established following countrywide meetings held by local groups of owners and managers who want a fairer rates system.
The organisation has been endorsed by the small businesses representative body, Isme, with its 8,500 members, as well as the organisation of retail grocers, RGDATA.
The Irish Hotels Federation, the two vintners' organisations and the Society of the Irish Motor Industry are also on board as are the Restaurants' Association of Ireland, travel agents, chambers of commerce and other business groups.
The bodies want the Government to amend the Valuation Act 2001 to allow an employer to appeal a rates valuation due to a change in economic circumstances, as is the case in Britain.
IEAR says it is vital the Fine Gael-Labour Government moves quickly to reduce the overall cost of local government
An independent report -- Assessment of the Local Authority Commercial Rates Issue for the SME Sector by economist Jim Power, and commissioned by IEAR -- states that local authority commercial rates represented the biggest burden facing small businesses, increasingly forcing many small firms out of existence.
And as businesses close, a large part of the commercial rates base was being eradicated.
In a commentary on the latest retail figures, economist Alan McQuaid of Bloxham Stockbrokers forecast that consumer sentiment would remain weak citing continued high levels of personal indebtedness and the erosion of disposable incomes.
"Consumer spending is likely to maintain the downward trend of recent years with declining real disposable incomes being the main driver," he said.
Mr McQuaid predicted a fourth year of decline in personal spending in real terms in 2011, and that households would "remain in cautious mode" next year.
Meanwhile, a new survey by global property company Cushman & Wakefield found that Grafton Street, Ireland's most expensive retail location, still remained 15th in the world in terms of rent costs, ahead of shopping locations in Beijing (16th) Singapore (17th), Amsterdam (18th), Tel Aviv (19th) and Toronto (20th).
The league table was topped by New York's Fifth Avenue, followed by Hong Kong, Tokyo, Sydney and Paris.