THE announcement of the takeover of the leading Irish retailers Quinnsworth by the British giant Tesco has caused great uncertainty among food manufacturers and suppliers.

This uncertainty derives from several key differences between the new Tesco Quinnsworth entity and the Quinnsworth that existed before the takeover.

First, with the takeover Quinnsworth becomes part of a business that will be turning over almost £13.7 billion. To put the scale of this turnover in context, the whole Irish grocery market is worth £4 billion.

The new Tesco Quinnsworth business will be almost 20 times greater than any of the other retailers in the Irish market.

A second major uncertainty derives from the source of supply of goods to the new outlets Currently, the majority of Tesco products sold in Britain are manufactured or distributed in Britain.

Some 50 per cent, or approximately £6 billion, of Tesco's turnover in Britain derives from goods sold under the Tesco own brand. This contrasts sharply with the situation in Ireland. In Dunnes and Quinnsworth, own brand accounts for only IS per cent, that is a maximum £120 million worth of products in either case. What does this mean?

The key issues for suppliers are:

. Tesco has stated that it wants to enhance the profit level of the Irish business and increase margins from 5 to 6 per cent, (approximately £60 million) over a two to three year period. This can only be done by taking business from other Irish retailers or, more likely by reducing margins to suppliers and manufacturers.

. Suppliers face a greater threat of displacement, both because of Tesco's links to branded grocery goods producers in Britain, which would be supplying their British business currently, and through the development of the Tesco own label on the Irish market.

Suppliers here face potential pressure on margins due to the entry into the market of a retailer of huge scale, competition/displacement of Irish supply in the area of branded goods where parent companies will be doing business with Tesco in Britain and further competition/ displacement of Irish goods through the development of the Tesco own label.

While indications from Tesco thus far have been that many of these developments may take place over a 12 month to two year period, the question still remains "when", rather than "if".

A key issue for policy makers is thus the likely impact of the Tesco involvement with the food manufacturing and supplying business in Ireland. In this context, Fair Trade provisions such as the Groceries Order, which ban below cost selling and prevent entry into the market through dumping and severe discounting, must be continued.

Suppliers will argue that the Minister for Enterprise and Employment, Mr Bruton must, under the current review, extend the Order on a permanent basis.

The second issue raised by the Tesco takeover of Quinnsworth is whether this will be part of a trend and is the first in a more concerted takeover of the Irish food retailing market by British retailers.

In terms of competitiveness, the real economic issue is not the question of national ownership, but a question of cost competitiveness. Competitiveness relative to Britain is particularly important, as it is our biggest export market, largest source of grocery imports and our major competition for manufacturing investment for the foodbusiness.

The industry continues to labour under a PRSI regime which compares unfavourably with their British competition. ESB and gas costs in Ireland are also significantly higher. These issues are all the more relevant because of the recent moves in the pound/sterling exchange, which has been over parity for a long period and is still around 98p sterling.

This issue gains even greater relevance in the context of Ireland's entry into EMU and the almost cast iron certainty that Britain will remain outside. The implications for the Irish food and grocery business of the major player on the market being able to avail of competitive devaluations through Britain's possible opt out from EMU must surely be an issue.

For the food industry, the acquisition of Quinnsworth by Tesco highlights how much of a national gamble entry into EMU without Britain has become.