The weakness of the pound against the euro is causing an unhealthy disparity in prices in Ireland

The weakness of the pound against the euro is causing an unhealthy disparity in prices in Ireland

Retailers everywhere face challenges in several directions and the sector in Ireland is no exception.

Although our main concern is the impact of the economic woes on consumer spending, we have an additional problem in the extraordinary gulf that has opened between prices in the UK (including Northern Ireland) and the Irish Republic because of the rapid fall in the sterling–euro exchange rate. On some staple, leading brand items, sterling-denominated prices are more than 30 per cent below the euro equivalent.

This has led to a flood of cross-border shopping, the extent of which can be illustrated by two facts: Sainsbury’s is now reckoned to have a 2 per cent share of the Irish market despite not having a single store in the Republic, and the Asda store in Enniskillen, otherwise unremarkable, is now said to be among the top 10 performers of the entire Wal-Mart worldwide empire.

This haemorrhage of business is bad enough, but the price differences have led to widespread comment about supermarkets and other retailers in Ireland ripping customers off.

Government ministers have joined in, and they like simple problems with easily identifiable villains and quick remedies that can be announced to a grateful public. So for them, this is simply a case of Irish retailers making outsize margins. We fear the quick remedy they might come up with, such as bringing in price controls.

The reality is more complex. Supply prices from the major food and household product groups reflect the same gaps. Recent evidence showed that Irish retailers are paying up to 60 per cent more for certain items than their British counterparts – from the same multinational supplier. So are they the ones ripping off the Irish housewife?

Not necessarily, although they have traditionally enjoyed good returns in the Irish market and in many cases sustain local subsidiaries on a scale that is hard to justify. But these big producers are sourcing products in numerous currencies and selling them in numerous others. They employ much effort to try and keep the whole thing in balance.

Hedging and other devices used for this purpose militate against rapid reaction, but we are surely past that point now. It may be that producers are subsidising poor returns from the sterling market rather than coining it in elsewhere, but try convincing an Irish shopper of that.

It is unhealthy and dangerous to allow major price differences to remain like this between adjacent markets. Apart from driving retailers to source from the cheaper market, it will also eventually lead to political action, either at local or European level.

Most importantly, though, as this issue grows in profile it will make customers feel defrauded and they will think twice about buying these products at all, turning to cheap unbranded alternatives of doubtful quality.

That is bad news for everyone. In an age of ready access to information and a supposedly single market, suppliers need to be more sensitive to maintaining a fair price to all customers.

Simon Burke is chairman of Majestic Wine and Superquinn