Brexit casts shadow over Irish consumers in run-up to Christmas

Employers’ group Ibec has expressed concern at the softening of consumer demand and retail sales in the run-up to Christmas, which it blames on Brexit and the associated weakness in sterling.

The organisation’s statement came as its retail arm released fresh figures pointing to a further slowing of growth in the retail sector.

According to Retail Ireland’s latest quarterly monitor, the value of retail sales here grew by 1.1 per cent in the third quarter of 2016 compared with the same period last year.

However, this was the slowest rate of growth recorded this year and comes on the back of a string of other indices pointing to a slowdown in consumer demand.

While the value of sales for department stores, supermarkets and convenience stores grew by 1.5 per cent and 2.5 per cent respectively, the figures represented a softening of the rate of growth seen in previous quarters.

Border and ecommerce

The report said the value of sterling had adversely affected UK tourism sales, as well as driving Irish shopper’s across the Border and online to UK-based websites.

"The Irish retail sector is working hard to adjust prices to reflect this new reality, but is still selling products that were purchased at a much different exchange rate a number of months ago," Retail Ireland director Thomas Burke said.

“ Goods prices have fallen by 2.9 per cent on average over the last quarter and, in the first 10 months of the year, were down 8.5 per cent on the same period three years ago. There is limited scope to reduce prices further,” he said.

“ Retailers are squeezed on the one side by a consumer that is demanding price reductions to reflect the sterling devaluation, and on the other by UK-based suppliers seeking price increases to offset increasing input costs. This pressure has the potential to destroy margins in the sector,” Mr Burke added.

Bargain search

Sterling has slumped 20 per cent since the beginning of the year, prompting more consumers to travel North to shop or go online in search of bargains.

The lag between the value and volume of sales revealed in Retail Ireland’s figures reflects the high level of price discounting here as retailers seek to stay competitive.

Sterling was on the slide again on Tuesday as a leaked memo suggesting that Britain had no overall plan for Brexit and may take six months to agree one due to divisions within the UK government was widely reported by the media.

Retail Ireland’s report also noted that, since the beginning of September, the sector has seen fuel prices increase by over 12 per cent, posing a challenge to both volume and value.

Retail Ireland’s report follows figures from Visa this week, which showed consumer spending grew at its slowest rate for 17 months in October while ecommerce spending jumped 15 per cent.

The report also cited KBC Bank’s latest consumer sentiment index, which highlights a wariness on the part of consumers, despite the healthy pace of economic growth and continued recovery in the labour market.