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Money Times - November 8, 2016

Posted by Jill Kerby on November 08 2016 @ 09:00

 

ARE YOU THINKING OF CHRISTMAS SHOPPING IN THE NORTH?

Is it disloyal or unpatriotic to do your Christmas shopping in the North this year?

Judging by the debate on the various radio programmes I listened to last week, you’d think this was the most pressing issue of our times – worse even than giving into a demand for immediate public sector pay restoration, which is going to cost billions more than the country can afford right now.

The cause of this urge to shop in Newry, Belfast or Derry is the nearly 30% fall in the value of sterling against the euro. The prices of a lot of goods, especially alcohol, tobacco and non-perishable foods, was already cheaper in the UK than here. Northern Ireland shares the economy of scale that comes with a big marketplace. Wages and service costs are also lower, due in part to lower income, VAT and certain excise taxes in the UK.

Before the Brexit vote and subsequent fall in the UK currency, the 30% differential just didn’t make it worth the price of a tank of petrol and currency exchange fees to drive across the border from Dublin, Waterford, Cork, Limerick or Galway for an even modest shopping spree in the North.

Not so if you were making a big purchase like friend of mine here in Dublin who saved over €2,000 renovating their bathroom units, appliances, electrical and plumbing fittings, tiles, etc at a DIY bathroom specialist in Newry. The well known bathroom providers even offered a team of fitters who were on their approved panel.

That was nearly €7,000 worth of spending that has already gone North from just one Irish household. 

Last year we spent an estimated €4 billion in the run-up to Christmas. About 20% of us spent some of that money in the UK and Europe, including on-line. Even if only 20% of that total goes abroad this year, it could amount to €800 million that will not be spent with Irish retailers.

But this all needs to be kept in proportion. A huge volume of our spending is already spent in foreign-owned stores and services, from the likes of the British and German grocery suppliers Tesco, Marks and Spencer, Lidl and Aldi to the familiar high street and retail park shop where we buy clothes and shoes, DIY and garden equipment and even many big insurance companies. (Think Zurich, RSA, Aviva, Axa, even Irish Life, which is Canadian owned.) 

We grow and produce a certain amount of locally sourced foodstuff that is sourced locally - especially meat, dairy and bread products – but we are mainly a country of foods importers.  The ‘shop local’ campaign mostly refers to the support of Irish retail jobs, not the sources of production. Once wages and overheads are paid (which indeed circulate in the Irish economy) the bulk of profits earned on the Irish high street goes abroad.

So it is wrong, during periodic currency swings like today’s, to abandon the Tesco or Marks and Spencer or Woodies in your town for the one across the border and save 20% even after you take your transport and banking charges into account?

If you plan on spending €1,000 on presents, food and alcohol this Christmas, is it so bad to save €200 that could go on panto tickets, a movie, a train ticket to Granny in Cork or Sligo or even an extra tank of petrol (c€46 of every €75 goes straight to the State in excise/VAT) to drive there?

Brexit is already starting to push up prices in the North, though it will be next year before most people there see a substantial rise in prices as goods in the shop have already had their prices locked many months ago. The real bargains, a friend of mine who works for M&S here told me, will be had in the (still duty free) January sales in the North. Some currency analysts think Sterling could take another dip downwards before the year end, just based on historic patterns and drop from their current levels of €1.22 to buy one pound to a low of between €1.125 to €1.075 to the pound settling at c€1.10 to the pound.

Timing currency markets is always hazardous and even the professionals don’t always get it right. Meanwhile, shoppers have always crossed convenient borders – Canada and the US; Norway and Sweden, Germany and Poland -  depending on which way their currencies ebbed and flowed.

If you want a clear conscience this shopping season, stay away from the UK equivalent websites of your favourite UK retailers, in my case Amazon and M&S.

I had my eye on a thick cashmere sweater for €165 here that is selling for £120 in M&S Newry. At today’s exchange rate it shouldn’t cost more than €135 in Dublin.

Do you have a question for Jill?  Please email her directly at jill@jillkerby.ie or write c/o this newspaper.

 

 

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