Businesses along the border in the North West were handed a massive double boost when VAT and petrol prices were hiked in the Republic.
The rise in fuel prices brings the Republic closer to parity with Northern Ireland and will make it hardly worthwhile for motorists to drive across the border to fill up.
One petrol station in Londonderry — the Texaco station in Drumahoe — had already erected a sign welcoming back motorists after prices came closer together earlier this year.
And after Irish Finance Minister Brian Lenihan slapped eight cents (6p) on a litre of unleaded petrol yesterday, motorists would now gain only around £3.50 if they crossed the border to fill their tank, effectively ending the attraction of driving to areas like Lifford, Muff and Bridgend.
The strong euro and rising food prices had already made shopping in Northern Ireland an attractive option for people in the Republic.
Foyleside shopping centre in Londonderry has seen a significant increase in the amount of euros taken at the tills, and in vehicles registered in the Republic in its car parks.
Even before this latest boost, supermarket giant ASDA revealed that up to 40% of its £1m per week takings in Strabane was coming from the euro zone.
The superstore has seen up to a 12% increase in customers travelling from the Republic in the last year, to escape high prices and make cash go further — and Mr Lenihan’s move to increase VAT will add a further incentive for consumers to look north.
The chief executive of Londonderry Chamber of Commerce Janice Tracey today said: “I think the budget announcement will strengthen the position that the outlets in Derry have and strengthen that positive bias that we have at the minute.
“The increase in petrol taxation will have an effect on that sort of border trade and people may not find it worth their while to travel over the border for petrol.”
Ms Tracey added a note of caution however.
She said: “This is a short term win. We cannot rest on our laurels and we cannot build a business plan based on this.
“Globally, we are moving into a challenging position and we are all going to have to dig deep and tighten our belts together.”
Toni Forrester, chief executive of Letterkenny Chamber of Commerce today said it did expect the budget by Minister Lenihan to hit local shops and the petrol pumps in the short term at least.
She also said that the chamber were advising local people to shop locally or risk losing their local shops.
Ms Forrester said: “Basically because of the VAT increase consumer goods will go up. The overall thing with the budget is that everybody is going to have less money to spend.
“The immediate impact of that will be a slow down until people realise they can spend there money wisely here.
“We haven’t been seeing as much cross-border trade coming from Derry to Letterkenny recently. That has slowed down because of the exhange rate.
“Petrol is also set to go up eight cent a litre so that will have an impact for anyone who has to travel more than a few miles to the border, but diesel hasn’t gone up so we are expecting that that cross-broder trade into Donegal will continue.
“What we are concerned with at present is that the money that is there is spent locally.
“One of our messages is that if people don’t shop in local stores we could lose them.
“It is just about being more clever with our money and making it go further and it is all about consumer choice.”
She added that on a more positive note, the government’s new €200 levy on holiday and second homes would help increase the coffers for Donegal.
“Donegal is a big holiday home destination for people in Northern Ireland,” she said.