The labour challenge: IFCR’s interview with Retail Ireland director Arnold Dillon

The cost of living challenge is at the root of the current labour crisis, according to Retail Ireland director Arnold Dillon – so how do we make Ireland an attractive place to live and work?

The cost of living in Ireland is making it a less attractive place to come to live and work, in turn creating acute shortages in the retail labour market, Retail Ireland director Arnold Dillon has warned.

Post Covid, labour market shortages are the number one problem for retailers and the issue that Retail Ireland members raise with him, he says.

Mr Dillon says there had been the hope that as the pandemic concerns eased and international travel reopened that the labour shortages would be addressed by former retail sector workers returning to Ireland from their homes in other parts of Europe.

“But that hasn’t happened – it’s remained a really acute problem and I think there’s a number of reasons for that,” he told IFCR.

“Certainly one of them is Ireland’s attractiveness as a place to come and work. The cost of living issues in Ireland in terms of the housing, in terms of the rental market, in terms of childcare means that it is much more difficult and challenging to get international workers to come and work here.

Cost of living factor

“Even if the headline rates of pay are often significantly ahead of where they might be in their home countries, you find that when they factor in cost of living here that it doesn’t have quite the same compelling logic that it once did.

“Needless to say, these are challenges that are being faced right across the economy. The pandemic has prompted many people to rethink their careers and their lives, so while I think we have more people than ever working in the Irish economy, actually the number of hours that people are working haven’t increased dramatically.

“So we are often finding that people are trying to reduce their hours and that’s down to personal choices and lifestyle choices, but it makes it more challenging for employers to find the skills that they need.”

Labour intensive sector

On top of the labour issue, retail is facing other significant cost pressures, Mr Dillon says.

“Retail’s a very labour intensive sector, so when it comes to the range of government employment reforms and labour market reforms, the retail sector is particularly affected, more than other sectors.

“So a whole range of new initiatives, many of them very worthy in their own right around statutory sick pay, pension enrolment and other different leave entitlements are all coming at one time for the sector and that does add additional cost for businesses that are already struggling to recruit new staff.”

Mr Dillon says there are some skilled trades in short supply which could be useful to include in the work permit regime.

“For example, butchers and bakers in the grocery sector are obvious examples where we’re having real difficulty recruiting staff,” he says.

“But I think the government’s response will have to be a mix of things – getting cost of living issues under control and reasonable rents and accommodation and childcare. I think those are all really essential in terms of trying to resolve the labour market issue.

Re-entering the labour market

“I think also there needs to be greater incentives for people to come back into the labour market, such as older people or people who haven’t worked in a number of years. Potentially there are incentives that could be looked at.

“I think it’s important that retail is seen as an attractive place to come and work, and certainly in Retail Ireland we have a Retail Ireland Skillnet that offers a whole range of training courses and a degree programme, and we also have an apprenticeship programme. So to be able to offer people careers in retail so they see it as an attractive career path to develop their own professional career within the sector is also key in the medium term.”

Mr Dillon took up the role of director of Retail Ireland in January 2020, and that timing pitchforked him into something of a baptism of fire as the pandemic made its presence known within weeks.

Baptism of fire

“Prior to that I was in a number of different roles in IBEC on the communications side but I had also spent a lot of time working on Brexit as well on policy issues and challenges that arose out of that,” he says.

“But I really wasn’t in the role for very long before Covid hit and it’s only now that we’re getting back to business as usual – a little bit.

“The first time it really struck home was when I was over at a meeting in Brussels for the first time – I was going to meet other trade associations across Europe through our umbrella group in Brussels called Eurocommerce.

“I remember I landed and got a call back that the Minister for Enterprise at the time, Heather Humphries, was convening a special meeting to deal with the concerns that had arisen around Covid and issues around supply chains. So I had to turn around and rearrange a flight home and I actually never made it to the meeting in Brussels on that day because I wanted to be back for that.

“That was an in-person event that was held in the Department the next day which was convening different trade associations and representatives from different parts of the economy, and at that point I suppose it was very clear that something was coming that was going to have a very significant implication for business and the country at large.”

Early Covid concerns

The immediate concerns were around security of the supply chain, heightened consumer anxiety, uncertainty around the implications of the pandemic and where things were headed, he says.

“Obviously the spectre of panic buying and people hoarding arose very quickly and very early on and I suppose the initial concerns across government and across the retail sector in particular were to make sure that we were coordinating a response and that the supply chains remained open and there was going to be an ongoing flow of food and medicine and essentials.

“That was the first of countless meetings that took place during the course of the pandemic that dealt with a whole range of issues, and obviously the employment issue and managing people and closing and reopening – but in the first instance that was the primary concern, to make sure there would be no disruption to the food supply chains.”

While food supply was a serious issue, fuel, logistics and transportation were also central to the thinking of the government at the time.

“During the initial phase of the pandemic, the chair of Retail Ireland was Brian Donaldson of Maxol. So I spent an awful lot of time working with Brian in terms of identifying the key concerns of the retail sector and obviously fed into that with concerns of the energy suppliers and the forecourts and making sure those were up in lights In government when it came to setting out a public policy response.”

Impact on forecourts

The pandemic itself affected different parts of any forecourt business in different ways, he says.

“The core fuel sales obviously would have taken a massive hit at various points during the pandemic because there were very significant restrictions on people’s movement. People were working from home so that would have massively reduced the amount of fuel that was being sold.

“At the same time, forecourts came with their retail offering and their grocery offering and I think depending on where businesses were located had a central bearing on how that business fared during the pandemic.

“In many instances, such as service stations on motorways, clearly there would be a significant drop in footfall and in the number of customers that they’re dealing with.

“Similarly, premises that were located near city centres and town centres that would typically have served commuters, again saw a very significant drop in terms of customers.

“There would be certain examples whereby certain businesses would have been located in suburban areas that would have seen much greater numbers of customers because people weren’t travelling into the city centres. So a certain number of businesses and shops and forecourts experienced an upswing in trade at various points, but by and large it was a very significant hit to certain forecourt businesses during the pandemic.”

Challenging environment

With new challenges such as labour shortage and inflation, the retail sector in Ireland is expected to continue to be a challenging environment in the months ahead, Mr Dillon says.

“We would still expect there to be a very tight labour market and for there to be a real challenge recruiting people, but clearly the cost of living is going to put extra pressure on consumers and we’ve seen over the last couple of months a very significant dip in consumer sentiment which we had seen rise to a very positive level after Covid,” he says.

“I think people were much more optimistic that we’d finally seen the back of Covid restrictions – certainly certain categories and groups of people had managed to put aside savings during that period because people were spending a bit less.

“So retail initially saw the benefit of that and I think in some cohorts of people I think additional savings have been built up, but that’s not the case for all people and there’s a significant proportion of the population that will be hit very hard by energy costs.

Feeding through

“But also these increases are feeding right through into a whole range of different cost headings across the economy – we’re seeing it in the retail sector where there are inflationary pressures in retail in a way that really hasn’t existed in the last 10 years at all.

“It’s been an incredibly low inflationary environment in retail, but with the cost of input costs going up, with raw material or energy of transport, all of those are going to feed in and we’re likely to see those manifest themselves  in increased prices to consumers.

“I would say we have an incredibly competitive retail market out there and retailers will be working very hard to ensure that the amount of increase passed on to consumers is at an absolute minimum. The intensive competition will keep prices at a reasonable level but clearly we’re entering an inflationary environment and that is something that we haven’t experienced for a very long time in Ireland.

“I think that is a particularly challenging environment, in that an awful lot of these inflationary pressures are coming from outside of the country so the costs can’t easily be offset.

“Inevitably right across Europe, at some point there will be a continuing rise in inflation but we would like to think that maybe towards the end of the year those sort of pressures will ease and good business strategies and a good offering for consumers will be able to ensure that businesses retain their positions in the market,” Mr Dillon says.

To read the full interview, visit Ireland’s Forecourt & Convenience Retailer.