ISME: VAT cut would stimulate retail sector

The Irish Small and Medium-Sized Enterprises Association (ISME) has voiced its concern over the latest CSO retail sales index which shows a decline in monthly retail sales.

The volume of retail sales fell by 2.4% in September after seasonal adjustments, while there was a 4.4% decline in the value of retail sales in September compared with the previous month. This also equated to a year-on-year decline of 1.6%.

With consumer sentiment and spending seemingly waning, the ISME claims the government’s failure to cut VAT has led to these negative figures.

Neil McDonnell, CEO, ISME, said: “According to the recent KBC Bank/ESRI sentiment index, consumer sentiment and spending has declined, falling from 105.1 to 102.9.

“This creates an added pressure on the retail sector. Had Government reduced the VAT rate from 23% to 21% this would have provided the retail sector with a needed boost.”

It’s not the first time this year that a VAT cut has been raised as a potential boost to small retailers. In July, Retail Excellence claimed that a 3% cut would protect retailers from any negative fall-out from the UK’s decision to leave the European Union (EU), and put an end to the current negative VAT differential between Ireland and the UK.

The ISME believes there are seven key issues facing Ireland’s small retailers at present; most notably the low margins - as evidenced by the latest CSO figures – and the excessive business costs including insurance, business rates and development charges.

The ISME fears insufficient bank credit availability is also placing undue stress on retail SMEs, as is the lack of adequate broadband connectivity and the worrying surge in the Hidden (Black) Economy.

McDonnell fears that the government’s insistence to push through increases to the National Minimum Wage has also played a part in consumers seeking to tighten their belts.

“The recent 3% increase in Budget 2018 to the National Minimum Wage will do nothing to help low paid workers deal with growing costs of living, but it will exacerbate the precarious nature of the retail sector for everyone.”

Last updated: 2nd November 2017