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Retailers welcome budget 2023 energy support scheme

Posted on: 18 Oct 2022

Retailers have welcomed Government efforts to assist them in the face of rising energy costs. As part of Budget 2023, the Temporary Business Energy Support Scheme (TBESS), a €1.25 billion initiative, offers small businesses energy bill payments covering 40% in the increase of their electricity or gas bills - up to a maximum of €10,000 per month.

 

Businesses that show their average bill has increased by over 50% over the last 12 months will be eligible for the scheme (although this leaves uncertainty around assistance for new businesses). The payments will be administered by Revenue, backdated to September 2022, and run until at least February of next year: “It’s the exact same way the pandemic payments were made into your bank account,” noted Vincent Jennings, CEO of Convenience Stores & Newsagents Association (CSNA).

 

The scheme comes at a time when grocers are experiencing as much as 400% increases in electricity prices since January 2022. “As food retailers, we have a certain amount of energy usage in order to be health and safety compliant and to operate our shops in a proper manner,” said Tara Buckley, Director General of RGDATA. Retail experienced “a strong comeback when Covid restrictions lifted”, according to Arnold Dillon, Director, Retail Ireland. “There were positive retail sales figures throughout the latter part of last year and the start of this year, but the last few months have been challenging. The pent-up demand that built up over Covid subsided at the same time as the cost of living crisis began. 

 

Retailers have highlighted a drop in demand for certain products. The hike in business costs has resulted in a significant number of businesses no longer being viable.” The scheme’s pledge to cover 40% increase of price rises is probably insufficient, stated Jennings. “Energy has already gone up in a horrendous fashion – and if it goes up further it will be a problem,” he said.

 

At this month’s Retail Forum meeting, Damien English TD, Minister of State for Business, Employment and Retail, told retail representatives the Government was willing to review the Scheme for a possible secondary intervention in February 2023. “There is sufficient contingency to allow it to be expended beyond February,” noted Jennings. “It’s understood it’s of import that people are protected against the excesses of the charges.” Retailers have commended efforts within Budget 2023 to ease the cost of living crisis.

 

The Budget reduces personal tax and childcare costs, and grants domestic electricity customers three €200 energy credit instalments to help reduce electricity bills. Minister for Finance, Paschal Donohoe, has also doubled tax-free bonuses, which employers can give employees, from €500 to €1,000. However, multiple labour market reforms (in and outside the Budget) are putting pressure on business owners. The Minimum Wage, for example, has received an 80c hike, which is “creating concerns around the cost of employment at a time when retailers don’t want to reduce hours or jobs,” said Buckley.

 

Dillon noted that while labour reforms - Pension Auto Enrolment, Statutory Sick Pay, and the movement from the Minimum Wage to the Living Wage - “have merit in their own right, when they come together, they result in significant costs for businesses. Those additional labour costs are adding around 9% to employee costs over the next 10 years, but because retail businesses are so labour intensive, the added costs will be multiple of that 9%. What we didn’t see in the Budget, and still think is necessary, is a method of support for retailers through that transition period.”

 

Retailers with deli and hot drink offerings are further impacted by the decision to withdraw the reduced VAT rate for hospitality from 9% and return it to 13.5%, a “double whammy” of added costs alongside the incoming coffee cup levy, according to Vincent Jennings. This VAT increase, which retailers say will push up prices, may impact the attractiveness of town and city centres as destinations, already hampered due to policing shortages.

 

Retail Ireland praised Budget 2023’s funding allocation for 1,000 new Gardai trainees but called for greater support to tackle crime and anti-social behaviour. “Anti-social behaviour puts off people from coming into town centres,” said Dillon. “If they don’t feel safe or secure in streets, it undermines the efforts retailers are trying to make to ensure they have a compelling offer for their customers. A visible Gardai presence around town and city centres can go a long way to alleviate people’s concerns and anxieties.”

 

The decision to end the special 9% VAT rate on newspaper sales was one encouraging sign for convenience stores. “Currently, we earn on our commission based on a VAT-exclusive price,” said Jennings. “If there’s no VAT on newspapers, then we earn our commission on a greater amount.” However, he noted that it was uncertain as to whether or not the rate would apply to magazines as well as newspapers. Unsurprisingly, cigarettes saw another 50c increase in price in Budget 2023.

 

“This is a health matter, so you can be guaranteed if this isn’t 50c, it will be more than 50c, not less,” continued Jennings. Cigarette sales are still essential for CSNA members, he said, but “we have to find different ways to replace the product. It’s not a good thing that our industry relies on tobacco for anything. It’s not something we should be proud of.”

 

In Budget 2023, Minister Donohoe did not increase excise on alcohol and granted up to 50-cent excise relief to small cider producers. However, Evelyn Jones, Government Affairs Director of the National Off-Licence Association (NOffLA), who had called for a 7.5% reduction in excise on alcohol, described the lack of a reduction as disappointing.

 

“We are burdened with the highest levels of alcohol excise in the EU and UK, and excise increases from a decade ago remain in place and continue to impact small, independent businesses,” she said. “It is also disappointing that an excise reduction was not introduced, given we have Minimum Unit Pricing (MUP) in effect this year: a targeted public health policy.

 

Now that MUP safeguards against the retailing of alcohol at dangerously low prices, Ireland’s punitively high excise levels are no longer justified from a public health perspective.” When it comes to the health of Irish retail businesses, though, Budget 2023 appears to have provided some relief in the face of an ever-increasing energy crisis.