Off-trade

Increased cross-border shopping predicted

75% of off-licences surveyed by the National Off-Licence Association experienced either no growth or a decline in their businesses last year.

Furthermore, 64% stated that their sales volumes had declined by up to 40% since the first excise increase in 2012 with 83% predicting that below-cost invoice selling will have a negative impact on their businesses this year.

The National Off-Licence Association has released its Annual Members’ Survey results as part of its 2018 Pre-Budget Submission to the Department of Finance. It shows that 67% of off-licence retailers surveyed believe a reduction in excise on alcohol will mitigate against the likely impacts of Brexit.

The 2017 NOffLA Annual Members’ Survey also found:

  • 30% of respondents report a decrease in turnover of between 10% and 30% in 2016 compared to 2015
  • 42% report a decline in sales across all alcohol categories
  • the decline in business has led to job losses (reported by 31% of respondents), delisting of products (34%) and a reduction of staff salaries (30%)
  • 50% believe that a ban on below-invoice-cost selling would level the playing field with large supermarkets. 21% believe that the introduction of Minimum Unit Pricing would also achieve parity
  • 52% of respondents state that they struggle to maintain cashflow
  • 86% believe that the excise duty increases in 2012 and 2013 have had
  • a negative impact on their business
  • if alcohol excise is increased in Budget 2018, 44% of off-licensees will struggle to remain open
  • if excise were to be reduced by 15% (10c on spirits/beer/cider and 50c on a bottle of wine) in Budget 2018, 34% of respondents could employ more staff and 33% could increase salaries
  • since the first increase in excise duty in 2012, 36% of respondents have been forced to reduce staff numbers, 43% have reduced salaries and 30% have struggled to remain open
  • 83% of respondents believe that a ban on below-invoice-cost selling would also serve to mitigate against the risks of Brexit
  • 97% of respondents don’t believe the government is doing enough to support small businesses.

 

Drawing on the latest cross-border trade research from Intertrade Ireland, NOffLA’s 2018 Pre-Budget Submission also details the reality of the threat posed by Brexit. The devaluation of Sterling and subsequent rise in cross-border shopping is evidenced by the dramatic increase in the number of Irish-registered cars in Northern Irish shopping centres during 2016.

Due to weakened Sterling, the share of Irish-registered cars in Northern Irish shopping centres rose from 33% in Q1 2016, to 43% in Q2. Post the Brexit referendum, there was a subsequent rise of 10-12% in the value of the €uro against Sterling and so Q3 2016 saw a further increase to 56% in flows of cross-border shoppers.

This represents an alarming 73% increase in Irish-registered cars parked in Northern Irish border shopping centres in September last year, compared to January.

As a result, NOffLA members operating along border counties are in danger of going out of business.

With the off-licence sector losing 3,000 jobs since 2008 NOffLA is calling on government to protect the remaining 5,900 jobs in the sector. Its submission has called on government to reduce excise duty on alcohol by 15%, apply parity to wine taxation in relation to domestic alcohol, reintroduce a ban on below-cost selling and establish tighter control on out-of-state alcohol imports in terms of VAT and excise collection.

Specifically, it has called on government to:

 

  •  reduce excise duty on alcohol by 15% to support Ireland’s already struggling regional and local economies and to secure the livelihoods of communities in border regions. Ireland is currently the most expensive country in the EU in which to buy alcohol with prices at 175% above the EU average.
  • apply parity to wine taxationin relation to domestic alcohol. At present, retailers and suppliers need to raise an extra €17,958 per 1,000 cases of wine in excise and VAT due to increases in Budget 2013 and 2014, now totaling €47,035 – up 61%.
  • reintroduce a ban on below-cost selling of alcoholto ensure that retailers cannot reclaim 23% of the loss in their VAT returns. This would save the State an average of €24 million each year. Such a ban would also ensure that alcohol is retailed in a responsible manner through the elimination of deep discounting.
  • establish tighter control on out-of-state imports thus ensuring out-of-state and online retailers cannot sell alcohol directly to Irish consumers without paying the required tax and VAT. Cross-border illicit trade has been given an added impetus due to the devaluation of Sterling and the lower rates of excise charged in the UK. Also, higher excise on alcohol gives an economic incentive to the smuggling of alcohol products. The number of Revenue seizures of alcohol products increased greatly in 2016 compared with previous years. In 2016 there were 1,875 seizures of alcohol products compared to 938 in 2015, a near doubling of seizures year-on-year. This compares to 550 in 2014, 507 in 2013 and 359 seizures in 2012.

“The independent off-licence sector continues to face significant challenges associated with a punitive alcohol tax regime that is not in line with other European nations and is damaging not only local communities but also our national competitiveness,” commented NOffLA’s Government Affairs Director Evelyn Jones, “This situation has now been exacerbated by the likely impacts of Brexit and the debilitating impact cross-border trade will have on Irish SMEs.

“NOffLA members across the country are today surviving due to their expert staff, specialised offerings and established position in communities, not the overall national economic growth of the past couple of years. That said, in light of the unique challenges posed by Brexit, NOffLA members cannot rely on this going forward. If Sterling continues to devalue we will see a decimation of border communities and a broader national impact.

“Despite the overall challenges faced, we’re positive that the introduction of the Public Health Alcohol Bill, an appropriate Minimum Unit Price of €1 and a reduction in the level of excise will enable us to continue to responsibly serve communities across Ireland,” she concluded, “We’re therefore calling on the government to take the appropriate measures, giving us the means to contribute to the national recovery and future growth.”

 

 

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