‘Perfect storm’ could again see shoppers surging North

Fears have been expressed that a "perfect storm" of currency shifts and tax changes could lead to a surge in shoppers from the Republic once more crossing into Northern Ireland in search of better value.

A new price survey from Revenue indicates the cost of alcohol and tobacco has climbed in the Republic over the past 12 months while the price of identical products in Northern Ireland has fallen.

Revenue priced 15 products, including beers, wines, spirits, motor and home heating fuels, in both jurisdictions in recent weeks and found they were all cheaper in the North compared with 12 months previously.

All but one of the 11 alcohol and tobacco items surveyed in the Republic had increased over the same period.

The cost of petrol, diesel and home heating fuels had declined significantly on both sides of the Border, linked to the collapse of oil prices on international markets.

A packet of 20 cigarettes in the Republic went from €10 to €10.80 in the past year, while the price of the same brand in Northern Ireland fell from €12.47 to €11.92.

Widening gap

A bottle of vodka in Dublin was unchanged at €20, while in Newry it fell by €1.58 to €16.64. The price of a 500ml can of stout was identical in both locations at €2.12, but a 33ml bottle of lager which costs €1.66 in the Republic cost €1.27 in the North - a price difference of 39 cent. In 2015 the price differential was just 15 cent.

The price of a bottle of sparkling wine was put at €18.17 in the Republic in May while it cost €13.77 in Northern Ireland, a price difference of €4.40. A year ago the price difference was €3.82.

The only change in excise or duty over the past year was a 50 cent increase on a pack of 20 cigarettes in the Republic, so the price changes identified by Revenue are largely attributable to fluctuations in the euro and sterling exchange rate.

"It is always a concern to see the price gap widening," said Thomas Burke of Retail Ireland. "What we would be concerned about is a perfect storm which would see price gaps widen because of currency shifts and tax changes."

Tight margins

Mr Burke said there had been no indications from retailers under the umbrella of the Ibec group suggesting people had started travelling North across the Border again, and he expressed concern that shoppers would start to think there “are greater bargains to be had in Northern Ireland”.

“We would hate to see a return of the spectre of cross-Border shopping. The margins of retailers in the Republic are tight enough and only small shifts could have an impact.”

The research revealed that most alcohol products as well as home heating fuels are cheaper in Northern Ireland, while tobacco and motor fuels cost less in the Republic.

It also shows that prices for goods in which Northern Ireland already had a price advantage over the Republic have become even cheaper in the past year.

In addition, the gap in prices between the jurisdictions where the Republic held the advantage, such as cigarettes and auto diesel, has narrowed.

Last month, Chris Martin, the chief executive of Musgrave, the Cork-based supermarket group, predicted there could be a return to the exodus of shoppers to Northern Ireland if sterling continued to weaken against the euro on the back of a vote for the UK to leave the EU.

Paddy Malone, spokesman for the Dundalk Chamber of Commerce, said the level of cross-Border trade had slowed down in recent years but retailers in the Border town were always conscious of how quickly the situation could alter with exchange rate fluctuations and changes in taxation.

No benefit

“Many retailers in Dundalk will say they’re not prepared to invest in their business because they don’t know if in five years they’re going to be selling a product that everyone is going to Newry to buy,” said Mr Malone.

He said off-licence owners in Dundalk were particularly fearful if proposed minimum pricing for alcoholic drinks was not introduced simultaneously on both sides of the Border. “That could wipe out their business,” he warned.

As for the sale of other products that are highlighted in the Revenue survey, he said: “There are regular queues at petrol stations south of the Border because of cheaper petrol and diesel, but there’s no benefit for places like Dundalk in cigarette prices being cheaper because of the scale of the illegal trade in tobacco.”