INSIDE THE WORLD OF BUSINESS
British high street goings-on concern Irish shareholders
THIS WEEK saw a number of trading updates from some of Britain’s biggest retailers.
Relatively good updates from Sainsbury’s and Marks Spencer early in the week were eclipsed by Thursday’s profit-warning from Tesco. The news that Britain’s largest supermarket group had experienced its biggest drop in underlying domestic sales for decades sent shockwaves through the retail industry and sent Tesco’s share price 16 per cent lower.
Lest Irish market-watchers switch off when it comes to the comings and goings of British retail, what happens on the British high street has a material effect on Irish shareholders.
A significant proportion of companies listed on the Irish Stock Exchange are directly dependent on the British consumer.
DCC, CRH, Grafton and Paddy Power derive a significant proportion of their revenue from the UK. Similarly, companies in the consumer food space such as Kerry Group, Glanbia and Greencore are affected by the supermarket sector. All three supply British supermarkets.
The drop in Tesco’s sales over the Christmas period is of course a worry, though the fact its large clothing and non-food businesses were worst hit will be some comfort to Irish food producers. Greencore’s acquisition of Uniq last year, which supplies Marks Spencer, now appears to be prescient, with MS reporting a strong performance from its food division. Greencore shareholders, who have had a volatile year, should be happy.
Tesco’s commitment to cut back on its store expansion and instead focus on the quality of its food offering may bode well for its Irish food suppliers. While it may again put pressure on prices as Tesco ups competition with rival supermarkets, the company’s commitment to invest in fresh food and the choice of product it sells offers an opportunity for Irish suppliers to prove their quality credentials and consolidate their position on British supermarket shelves.
A good case to make for special supports
SELECTING A particular region for State development support over another is always a risky practice which is guaranteed to attract accusations of political favouritism. But if ever a region qualified for special supports, the south-eastern counties of Waterford, Wexford, Carlow, Kilkenny and South Tipperary have a good case to make.
The closure of TalkTalk last autumn with the loss of 570 jobs in Waterford city was just the latest hammer blow. It follows the closure or consolidation in recent years of significant employers such as Waterford Crystal, Waterford Stanley, pharma group Teva, sugar processor Greencore and Braun Oral B.
There were two pieces of positive economic news for the sunny southeast this week, the more significant of which was the creation of 250 jobs at the new Eishtec contact centre in Waterford.
One of the most positive aspects of the story is that the company was founded just last year by three former directors of TalkTalk. The expansion is a result of winning a contract with UK mobile operator Orange which suggests the skills and knowledge gained at TalkTalk is being put to good use.
Earlier in the week Minister for Jobs, Enterprise and Innovation Richard Bruton announced a €200,000 fund for start-up food, technology and industrial firms in the region.
Questions have rightly been raised both about why start-ups in the southeast are being singled out for support and how much Enterprise Ireland backing is being given to Eishtec to create the new jobs. In a region which boasts two institutes of technology, a track record of industry but an unemployment rate consistently above the national average, targeted interventions by the State’s development agencies are not just desirable. They already seem to be bearing fruit.
Plan to plug copyright gap could come too late
MINISTER OF State for Jobs, Enterprise and Innovation Séan Sherlock is hoping to plug the long-standing gap in Irish copyright law by the middle of this month – but the signs are that this could turn out to be too late.
The High Court highlighted in October 2010 that Irish copyright legislation did not include a provision allowing rights holders – record companies and film studios – to seek injunctions banning internet service providers (ISPs) from allowing access to online piracy sites. EU intellectual property law requires the Republic to have such a provision.
Sherlock told the Dáil late last year he intended publishing the statutory instrument needed to make good this problem in January 2012. His department confirmed yesterday he intends doing this by the middle of this month.
It has since emerged that the Irish Music Rights Association, the industry body that acts as a watchdog for record labels operating in the Republic, plans to take the State to court for its failure to tackle the problem to date.
Theirs is one of the businesses that is most vulnerable to piracy, and the industry believes the problem is mainly responsible for a two-thirds fall in revenue over the last five years.
If the labels were to get to court and win it could leave the State with a multi-million euro compensation headache. The courts have already pointed out the legislation is short of what is required in EU law, so it’s fair to say the record companies have a strong hand.
