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VAT increase ‘will not replicate 2008 boom’

Long queues of cars inching their way along the Dublin Road has become one of the most visible signs of customer discontent down south. A discontent that Newry has often benefited from. The last real surge in cross border shopping happened in 2008 when the then Finance Minister Brian Lenihan raised the VAT level by half a per cent. It coincided with a 2.5 per cent in VAT in the north and was a decision that MR Lenihan came to regret. He lamented as a ‘major mistake’ and estimated that it cost the southern exchequer 700m EURO. But with the current Finance Minister Michael Noonan set to raise VAT from 21 per cent to 23 per cent in the New Year can Newry expect a similar windfall. Yes and no appears to be the answer. Those in business seem confident that it will highlight the differences in prices north and south but admit that it is unlikely to replicate the ‘perfect storm’ of scenarios that saw thousands of shoppers swarm across the border in previous years. Aidan Gough Strategic and Policy Director at InterTradeIreland said it will probably have an effect but that has never been the main reason behind cross border shopping. “The VAT rise may well lead to an increase in cross border sales but it is not likely to lead to a surge of the same magnitude we witnessed a few years ago,” he said. “The main driver behind cross border trade has always been the exchange rate and that is not as favourable to Newry as it has been in previous years. Furthermore a VAT rise will only affect items that VAT applies to. Things like food and children’s clothing are exempt from VAT. So while we may see people coming north for specific things like alcohol or large electrical appliances we won’t see the same numbers of people coming up to do their general shopping.” Conor Patterson, Chief Executive of the Newry and Mourne Co-operative and Enterprise Agency said that while it will probably lead to an overall increase in shoppers coming north it’s not something that Newry traders should or do rely on. It probably will have a bigger effect on people’s perceptions about the price differences north and south than it will on actual prices,” he said. “I will suggest to consumers that there is more value to be had in general up north as suppose to specific product by product price comparison. It will undoubtedly throw a spotlight on the price deferential and any price differential will push people north, but I don’t think Newry Chamber will be jumping for joy over it. Traders here have never predicted their business on any perceived fiscal advantage the north may have over the south. They have always tailored their business as much north as they have south.” The former President of Newry Chamber of Commerce and Trade added that while the currency difference may currently favour Newry basing a business on fluctuating exchange rates is a foundation of sand. It wasn’t that long ago that shoppers were going in the other direction,” he said. “While more harmonization in the two jurisdictions and a more stable border economy would undoubtedly be a good thing, that is now something out of the hands of both governments on the island. Down south the loss of fiscal sovereignty to the troika has meant such decisions are now made by Europe, while up north Westminster still controls such matters. Business should be based on the offers available, the value the consumer receives and the services they are offered. Shoppers should be making their choices on where to go based on value and quality rather than fiscal issues controlled by Europe and Westminster.


Newry Democrat

13th December 2011