Consumer spend critical to retail business revival

Rebuilding consumer confidence so people are not afraid to shop, even in moderation, must be a priority if your average retailer is to survive into the future. That is a general view shared by business owners in the myriad of small towns in the Border counties of the Republic as they try to marry their costs against a sharp reduction in income as customers continue to shy away from spending. While the exodus to Northern Ireland has tailed off quite significantly, many business owners are now feeling the full impact of the recession and quite a few have been forced to close their doors. The cost of doing business here is cited for the accelerated contraction of the retail sector - the cost of energy, rents, rates, service charges and labour are listed as hurdles that a retailer has to overcome before he or she makes a shilling. Most objective observers would say that those charges are universal to all businesses in the developed world. However, business owners here feel that the imposition they face in terms of energy costs and the other levies such as rates are greater than their counterparts have to bear in Northern Ireland. On the energy front, the decision to de-regulate the electricity market as from October of this year is welcomed by business representatives such as Malachy Magee, chairperson of the economic and enterprise sub committee of the Cootehill Chamber. According to Mr. Magee, who is a member of Cavan County Enterprise Board, electricity costs were kept artificially high in this State in order to attract other players into the market but this impacted adversely on the consumer. He welcomes the announcement from the Commissioner on Energy Regulation to fully de-regulate the electricity market as from October. "This is very good news for business and for retailers in particular. It will reduce energy charges dramatically as more competitors are persuaded to enter the market," says the Cootehill Chamber rep. The growth in the number of stores that are now empty is an unwelcome reminder of the difficult times that we are living in. While the decision by some local retailers to over extend themselves is seen as a reason for the onset of their difficulties, the cost of renting property is an undoubted factor in why some once successful retail enterprises are now struggling in these times of recession. Shopping space was at a premium in Cavan town during the boom years but the situation has now changed and rents are being negotiated downwards to retain existing businesses and stop the outflow to other areas such as shopping parks on the edge of town where free parking is attractive. It is stated that rents on the main thoroughfare of Cavan were €25 to €30 per square foot at their height but have now come down significantly as landlords seek to hold on to tenants who may have been with them for several years. The struggle to remain viable in difficult economic times is also the case for retailers in the smaller towns. They too had to ship the full impact of loss of business as people availed of the weak sterling to shop in Northern Ireland. While it is recognised that most of the businesses in the smaller towns of the county are freehold it is still a fact that there is a proportionate share who are renting. This is particularly true of younger business people who have entered the service sector in the past ten years. It is pointed out that rents in those smaller towns were never as high as those quoted for floor space in Cavan and Monaghan county towns and quite early on in the recession rents were moved downwards as landlords made sure to retain tenants. Like Cavan town, Monaghan town expanded during the boom years with Monaghan shopping centre becoming a focal point for a wide spectrum of shoppers particularly at the weekend. However, the affects of the recession are evident here with a number of units currently empty including the large anchor unit previously occupied by Patton's Arro store, which closed over a year ago. The cost of renting is understood to be a big factor in the failure of takers for vacant shop units. Indeed rents at Monaghan shopping centre have been revised upwards, some as high as 60% in recent times, which does pose a big problem for tenants in an era of reduced sales and tighter margins. The downgrading of Monaghan General Hospital from an acute hospital to a day treatment and step down facility is being blamed for the sense of despondency that currently hangs over the town. It is felt that the general hospital brought a status to the town that it now ceases to have. People now find it necessary to travel to Cavan and Drogheda to visit relatives and this is a loss of business to Monaghan. While there is an obvious downturn of business in Monaghan town due to its close proximity to the border, there is widespread praise for Gordon Fleming for what he has done to revitalise and invigorate the centre of Monaghan town in the last few years. Looking at the overall position Cootehill's Malachy Magee stresses the need to focus on the positive. He says that the stabilisation of the live register nationally and indeed the reduction by 110 in the total numbers unemployed in Cavan for April are straws in the wind that things maybe on the way to recovery. He believes that the more mature attitude of Irish people to accept the pain now if it helps us recover our competitiveness sooner is a healthier outlook than that displayed by some other EU member states. Acknowledging that the loss of jobs at Quinn Insurance will have a serious impact in Cootehill and Cavan, he suggests that this is an opportunity for the government to frontload the provision of infrastructure to this county. He welcomes the new M3 but says it should be further extended into Cavan, while the immediate development of the east/west route was now also necessary if the image of Cavan as a peripheral location is to be overcome in terms of attracting inward investment. Sean Murphy of Chambers Ireland is also heartened by the fact that our national unemployment figures have stabilised at 13% and while this is still too high it shows that the haemorrhaging of job losses has been halted, something that is important in reassuring consumer confidence. Mr. Murphy accepts that businesses in the border counties have had a tough time due to the significant devaluation of sterling and the gap that developed between the VAT rates levied in both jurisdictions. However, things were now levelling out and it was very likely that VAT will be increased in the UK by the new government, which should narrow the differences still further, he says. Asked about the costs of doing business here in the Republic, Sean Murphy states that the average retail business has to look at every single bill that comes in whether that be energy, salaries, number of employees, opening hours, rent or local authority charges. Rents went up during the boom years but Chambers Ireland is now continually hearing that rents are declining by negotiation. From the local authority perspective, he says that retailers south of the border feel that they have to bear the brunt of local charges - as distinct from Northern Ireland where there are still domestic rates. "Local charges are levied upon a small base of people down here, namely the business community," he says. Sean Murphy believes that there is a future for standalone retail businesses in this country but what will ensure the future of those shops is the maintenance of traditional customer loyalty. This customer loyalty will be maintained if people have jobs and money in their pockets, he feels.