RGDATA makes hard-hitting budget submission

RGDATA’s key activity in the past month was to make a wide-ranging Budget 2024 Submission to Government highlighting the challenges facing essential local community shops.

RGDATA told the government that “The operating environment for Ireland’s independent retail grocery sector remains challenging
at present. Inflationary and cost of living pressures are directly impacting on consumers leading to reduced consumer confidence and lower expenditure levels. Retailers and businesses are also having to manage sharply increased input costs.

Concerns

Retailers remain concerned at the stubbornly high level of some core input costs – energy and insurance costs in particular have not shown the level of decrease that might be expected given the underlying changes in the factors impacting on both sectors. Specifically on insurance, businesses have yet to see any tangible benefit from the substantial programme of reforms that have been introduced, with strong suspicions that insurers are gaining through increased profitability. On energy costs, the retail price of electricity remains excessively high given price movements at wholesale level. High energy costs have a particularly adverse impact on the independent retail grocery sector, as energy represents such a significant element of the operating costs for a shop, with 24/7 refrigeration, lighting, heating/air conditioning in all shops.

Challenges

‘These additional cost challenges are coming at a time when revenues are either stagnant or retracting considerably.

The biggest single increase in the operating costs for retailers stems from recent and pending changes in employment costs, largely due to new legal requirement introduced by the State over the last 12 months. Specifically, RGDATA estimates that new legal requirements including a new Bank Holiday, Auto enrolment, Statutory sick pay and an anticipated increase in the National Minimum Wage will cost retailers an extra €4,000 per annum in employment costs per annum.

Increases of this level at any time are a major challenge for businesses, but increasing these costs at a time when retail businesses are under unprecedented commercial pressures, with result in a reduction in employment numbers, or even threaten the viability of many
independent food stores.

‘Retailers do not have many options to deal with increased cost levels – they cannot increase prices or instantly attract more customers and the sector is a low margin business, where any impact on the bottom line is keenly felt. It is for this reason that the Government needs to look at some Labour Cost Support Scheme for SMEs facing additional State imposed labour costs. SMEs cannot just absorb these new costs.

General Budgetary Measures

In terms of the general approach to Budget 2024, budgetary measures should not increase thetaxation burden on businesses and consumers. It is also important that the Government should look at creative ways in which to help drive down costs in insurance, energy and labour, with some budgetary measures being employed to help achieve this.

There are opportunities for the Government in Budget 2024 to pursue initiatives that have the potential to support targeted regeneration and help to deliver vibrant communities across Ireland, RGDATA continued.

RGDATA has clearly listed its ‘asks’ in its budget submission including:

1. SME supports for dealing with increased costs
For the next 12 – 18 months, independent retail grocery businesses, in line with many other SMEs dependent on the domestic trade for business will face considerable challenges due to pending cost increases – such as energy costs.

2. Funding for increased Garda activity and the Justice System
The last 12 months have witnessed an unprecedented increase in the level of crime being
perpetrated against retailers. CSO figures suggest that between Q1 2022 and Q1 2023 the level
of thefts from shops increased by 37%. Additionally, retailers have also faced high levels of
violence and intimidation, to an extent that some retailers consider that there is an epidemic of
retail crime.

3. Town Centre First/Urban regeneration/Accommodation for Retail worker 

RGDATA details its position on a range of policy areas – including living above the shop, rates relief and permeability schemes, Capital allowance for investment in Town Centre premises and staff accommodation relief.

4. No increases in Excise
In light of the current inflationary pressures on consumers and business, RGDATA does not
see any case for increases in excise levels, which will only serve to fuel inflation further.

5. Moratorium on State imposed cost increases.
For the reasons outlined above, RGDATA believes that in Budget 2024 the Government should announce a 12 month moratorium on additional regulatory or compliance costs for businesses. The extent to which the State has added to the costs of running a business in
Ireland has been very graphically illustrated earlier when addressing the additional labour costs which businesses face directly as a consequence of a raft of new employment initiatives by the Government. Businesses that are dependent on a domestic and often local
market, cannot magic up additional turnover to fund new compliance costs.