Boom times for border as shoppers flock north
How Newry is becoming a very attractive city for southern bargain hunters Break for the border: nearly four in 10 shoppers at one shopping centre in Newry is thought to be from the Republic.
Just a year ago, the percentage would have been about one in fourNEWRY retailers are enjoying good business, as are traders in other places along the border, as a strong euro makes northern sterling prices more attractive.
For the managers of the Buttercrane and Quays shopping centres, customers crossing the border a year ago might have accounted for up to a quarter of their shoppers. The numbers now are estimated to be over a third and growing to nearer 40%.
Peter Murray, centre manager at Buttercrane, explained the increase: “The southern shoppers have no doubt that they are now getting better value for their money in the north and are travelling in bigger numbers than ever before.”
The border on this island has a long history of giving an excuse for unusual trading patterns. A long memory can recall different examples of when the incentives were to go ‘south' and when they were to go ‘north'. Sometimes the incentives were enhanced, or deterred, when the business was illegal.
The centre manager for the Quays Shopping and Leisure Centre, Cathal Austin, has particular evidence.
“We have always had a big proportion of cross-border shoppers but the recent change in the exchange rate has increased the number of visitors but also the frequency of their visits. People who used to shop here once a month arrive twice a month or even weekly. Some travel long distances and some have arrived on special coaches,” he said.
“We have benefited not just from better exchange rates but also from the perception of retailing in the south as part of the 'rip off Republic' syndrome. Surveys have shown that, compared to English prices, shoppers in the south are being charged too much for goods that they can get for much less away from the south.”
Customer demand is falling across the UK and Ireland, yet the volume of cross-border business is, at least for the Quays, 11% higher than a year ago.
As Peter Murray and Cathal Austin appreciate, there are two features which are important in determining the amount of cross-border trade.
First, there are long-standing differences in the effective price levels in each area. Second, the impact of exchange rate changes that have further affected relative price levels when customers consider doing their business on one or the other side of the border.
Evidence from the EU has quantified the impact of price differences on living costs. In 2006, Irish living costs were 26% higher than the EU average. UK living costs were 13% higher. Comparing Ireland and the UK therefore shows that for the same standard of living spending in the same currency would be 12% higher. For a north-south comparison, the average advantage of living or shopping in the north would be higher than 12%.
Incidentally, both Ireland and the UK have living costs that are higher than the EU averages and, for Ireland, are the second highest of the 27 EU states.
The price differences, north-south, also extend to household electronic goods and household appliances. The Irish average for these goods is 9% higher than the UK and the Irish figures are, this time, third highest in the EU.
Then the initial advantage has been enhanced by the depreciation in sterling. Sterling has effectively devalued by about 15% relative to the Euro: in 2007 where a euro was buying (or costing) about 68p, it is now in mid 2008 trading at about 79p.
While cross-border shoppers sense that there is a major difference in prices in favour of coming north, the arithmetic confirms that an average advantage of about 25% can be expected.
The assessment of Peter Murray in Buttercrane is that “shoppers from the south are buying goods where there are currently big price differentials”.
“That includes basic foodstuffs, drinks, chocolates, and washing powders but the range is wide, including CDs, DVDs, and fashion clothing.
“Cross-border shoppers tend to spend more per visit than locals. An average of €300-€500 would be normal,” he added.