THE NATIONAL Consumer Agency (NCA) compared prices for a range of household goods in the Republic and Northern Ireland last June. It found that a selection of grocery items were up to one third more expensive in the South. Retailers insisted this price differential largely reflected the higher cost of doing business in the Republic.
The Government asked Forfás, the national policy advisory body for enterprise and science, to examine the claim. It compared retail business costs in both parts of Ireland, in Britain and the Netherlands. Its study, published last month, found that operating costs in Dublin were some 25 per cent higher than Belfast and similar to London. But operating costs, the report also said, were about one quarter of a retailer’s total cost. Therefore, higher business costs alone failed to explain why retail goods were so much more expensive in the Republic.
Over the past 18 months sterling has weakened against the euro. Shoppers who expected to see a stronger euro translate into lower prices for imported British goods have felt cheated. As the Forfás report pointed out, the difference in operating costs would add 5 to 6 per cent to the total cost base of a Dublin retailer as against his Belfast counterpart. That, however, does not account for the huge price differential between the same goods on sale in both cities.
The Minister for Finance has suggested that shopping should be a matter of patriotism rather than merely price. Yet consumers who choose to shop locally rather than in Northern Ireland often receive scant reward for their efforts. Too many retailers fail to give consumers the benefit of a strong euro in the form of lower import prices for UK goods.
Shoppers can easily see the huge discrepancy between sterling and euro prices, as retailers fail to adjust the exchange rate to reflect sterling’s weakness and the euro’s strength. Major UK retailers who operate here claim they are competitively priced for the Irish market, and insist Irish and UK prices are not directly comparable because of the higher cost of doing business here. Given the findings of Forfás, that is difficult to accept.
The Forfás report has received far less attention than it deserves. Retailers need to convince a sceptical public that they are not abusing exchange-rate adjustment to profit at their customers expense. They might start by stating clearly, and very publicly, what exchange rate they are applying when converting sterling prices to euro.