Reinstatement of PRSI reduction will boost retail employment.
Government must introduce disruptive reforms to save the sector
ISME, Friday 27th February 2015
ISME, the Irish Small & Medium Enterprise Association, at the release of the latest CSO Retail Sales figures, today (27th February), warned that the costs of the retail sector continue to rise and immediate Government intervention is necessary, The Association called for the reinstatement of the reduced PRSI for class A employees to boost retail employment, bringing the rate from 8.5% to 4.25%, as it had been previously.
Retail sales figures showed an annual increase of 8.8% in volume and 5.5% in value. When the motor trade is excluded, sales were 4.8% higher in volume and 0.9% higher in value.
According to ISME CEO, Mark Fielding, “It is instructive that when motor vehicles are excluded the retail figures paint a picture of steady volume increases but prices under pressure, which is being reflected in margins in SME shops, still struggling to survive”.
“The labour intensive retail sector is a key source of employment in the state but it is clear that jobs will not be created if Government does not reduce the PRSI labour tax. The increase in employer’s PRSI from 4.25% to 8.5% has curtailed recruitment and is threatening existing jobs. It has led to substantial increases in wage bills with no corresponding increase in sales or productivity.”
Consumer confidence continues to trend upwards and in January was at the highest level in 9 years. However, survey results are suggesting that although consumers are more confident about the future, they are not yet feeling the impact in their pockets, and hence this is not yet feeding through to consumer spending in any meaningful way. The measures contained in Budget 2015 should help, but a further improvement in employment, some growth in earnings and a gradual easing of the personal tax burden are essential elements for a meaningful recovery in consumer spending.
The main issues facing retailers are:
Very low margins.
Excessive retail business costs such as commercial rates, development contributions and charges.
The surge in Shadow Economy.
The need for a Code of Practice, with an ombudsman for the sector.
A review of the effect of the abolition of the Groceries Order on prices.
Town centre revitalisation.
Social welfare anomalies and inflexibilities.
Insufficient bank credit availability for retail SMEs.
Sector specific training.
“Government repeatedly states that its job is to create a suitable environment for businesses to prosper. However, the PRSI burden combined with their current talk of raising the minimum wage shows that they are out of touch with the high-cost, tight-margin reality of the retail sector. The high cost base of retailers is unsustainable and acting as a brake on the recovery and must be reduced”, concluded Fielding.