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Why Executive would be off its trolley to target NI's retail giants

05/04/11

The ongoing importance of the retail sector to the Northern Ireland economy is again borne out by the Top 100 companies with x retailers in the list.   Within the retail sector those retailers who predominantly sell food are at the forefront of employment numbers with national chains Tesco, Asda, Sainsbury and the local food giant Hendersons occupying places 2^nd, 4^th, 8^th and 16th respectively in the list. This success makes it all the more difficult to fathom why the Assembly would want to jeopardise the growth of this sector with the announced proposed rates levy on large retail units.

Fears that the entry of the supermarkets to Northern Ireland would simply displace jobs or lead to a net reduction in jobs is not borne out by the evidence of the last 10 years. It is interesting to look back at how employment numbers by the Supermarket chains have grown over this time. 

As a reference point I have looked at the Belfast Telegraph Top 100 companies in 2001.  This was 5 years after the first entry of the national chains into Northern Ireland and at a time where the supermarkets were in the midst of new store opening programmes.  At that time Safeway were represented in Northern Ireland, a chain subsequently taken over by ASDA.  In 2001, Tesco, Sainsbury and Safeway (Asda) employed 10,748 staff.  Today that figure has risen to 16,250 employees, a 66% increase.  The 2011 figures will also not include a number of significant recent new store openings which could easily add another 1000 employees to that figure. 

Predictably, the independent sector is nervous about the expansion of the Big 3, but is right to be so.  Again the Top 100 List bears out that good quality independent retailers, not only compete, but can grow their own business if their offer is good enough and their business plan is solid. The best example is the local privately owned Henderson Group (Spar/Vivo) with a turnover of over £450 million.  It is one of the most dynamic convenience operators in the UK and owns and operates over 70 stores and petrol forecourt sites in Northern Ireland. Hendersons own employment figures in the last 10 years have grown almost in line with the national operators, rising 56 % from 1250 employees in 2001 to 2223 in today’s list.

In his recent budget announcement, finance minister Sammy Wilson stated that he will be looking to extend the small business rate relief scheme and cross subsidising this by applying a levy to large retail properties, including major out of town shopping developments which in his words“have not fared too badly during this downturn compared to our smaller businesses”. 

The proposed tax is ill thought out and as shown above, targets one part of the retail sector that should be one of the key sectors in terms of driving investment and job opportunities across Northern Ireland over the next few years. It is erroneous for independent traders to present this as an out-of-town supermarket tax when the reality is it will impact on all types of retailers in all locations. It will target large in town occupiers, such as department stores like House of Fraser, large fashion stores, bulky goods retailers such as IKEA, DIY stores and Garden Centres.  There are also many good local businesses who are working hard in difficult times to make a profit who will be surprised to be caught up by this tax because they trade from large units.  The tax is indiscriminate.

There is a big danger that if implemented that retailers, who are multi nationals and have a choice, will choose to invest in countries that provide a better return than Northern Ireland.  Retailers are currently demonstrating their commitment to Northern Ireland by opening more stores and employing a growing number of local people. It would be terrible to see that growth slowed or halted as a result of the Executive enacting a policy which will make the country a less welcoming place to do business. If the Executive are not careful the tax will lead to a lack of inward investment and many unnecessary closures of shops, leading to a net decrease in rateable income and higher unemployment benefits.

The Independent sector argue that the national chains make millions in profits and can absorb the tax.  However one point is clear, multi national retailers are not slow to close loss making branches.  It will be a very serious outcome if some high profile retailers choose to close a local branch of a large chain because it is forced into loss by this tax and who will assist hard pressed landlords with their empty rates bills when there are large vacant units in towns centres and shopping malls across Northern Ireland because they are economically not viable to fill.

 

Taken from articlae in "Belfast Telegraph - Northern Ireland's Top 100 Companies - March 2011" by Stephen Deyermond