£270m slump in cross-border shopping
Trade from south plummets as the value of euro hits a four-year low
A dramatic fall in shoppers from the south is costing the Northern Ireland economy up to £270m a year.
This is the size of the slump since the border rush three years ago in 2009.
The news comes after the euro – one of the main drivers of south-north shopping – fell to a four-year low against the pound last Friday.
An official Irish government report in 2008/09 estimated that the flow of cross-border trade was worth £370m annually to the province.
Since then, there has been a significant slump in southern consumer spending in Ulster shops because of the harsh economic climate.
Economist John Simpson said cross-border shopping amounted to £500m a year at its peak — but he estimated that it has now fallen to £100m.
“In 2009 when cross-border trade was going very strongly it was worth over £370m a year to Northern Ireland’s economy,” Mr Simpson said.
“We are now in a position where there is very little by way of an artificial incentive for that trade to cross the border so we’ve come back to what might be considered more normal cross-border trade.
“By my calculations, it is estimated that the £370m figure for 2009 is probably down now to less than £100m per year.”
The halcyon days of 2008/09 saw countless southern-registered cars streaming across the border to shopping centres in towns and cities such as Newry and Londonderry every day.
Indeed, during a strike by more than 250,000 public sector workers in the Republic in November 2009 there was a five-mile traffic tailback on the road to Newry as striking workers chose shopping over picketing — an event that was much-publicised in the media.
These so-called ‘Euro Tourists’ were taking advantage of massive price differences between identical items in shops on either side of the border as a result of a weak pound and favourable VAT and currency exchange rates.
By August 2010, however, the ever-deepening recession meant south-north trading had slowed to a trickle, with official reports confirming that numbers had fallen to their lowest level since September 2008.
Last Friday the euro was valued at 77.71p — a four-year low against the pound — which is likely to further dissuade the majority of southern shoppers from heading north.
A snap survey carried out by the Belfast Telegraph last week in Dundalk and Newry revealed that the huge savings of up to 30% that were once available on clothes and other items during the boom years had disappeared.
Eileen Doyle, manager of the clothing retailer Louis Boyd in Newry’s Buttercrane Shopping Centre, said there had been a drastic fall in customers from the south.
“I have definitely noticed a difference over the last two years,” she said.
“The weak euro has discouraged a lot of people from the Republic from coming to Northern Ireland as often as before and when they do come they aren’t spending as much money in the shops as they used to.”
Meanwhile, retailers in Letterkenny, Co Donegal, have launched a campaign targeting their Derry neighbours as sterling continues to strengthen against the euro.
As business flags, they hope this will recreate the 2008/09 trend in the opposite direction by offering deals to people from Northern Ireland.
At The Marshes in Dundalk, shopping centre manager Harry Traynor, said that he had recently noticed an influx of vehicles with northern registrations in local car parks. “More people have been coming to Dundalk from Northern Ireland recently, but we’re only talking about a tiny percentage increase at this stage,” he said.
Donegal traders bid to lure customers
By Brendan McDaid
The north west is also suffering as southern shoppers stay on their side of the border.
To compound the problem for traders in the region, the Donegal shopping hub of Letterkenny has launched a campaign to lure customers away as sterling continues to strengthen.
A raft of new initiatives have been introduced including strong pound-to-euro rates, billboard signage in Londonderry and summer discount projects co-ordinated by the Letterkenny Chamber of Commerce.
Many stores in Donegal’s largest town are now offering exchange rates of around €1.25 for £1 sterling, while hotel room deals are also being organised.
The new drive comes as the euro continues to weaken against the pound.
Traders in Letterkenny and across the southern side of the border have suffered over recent years as a strong euro saw droves of people from across the Republic heading into Derry and other parts of Northern Ireland to do their shopping, while the influx of customers from Northern Ireland to the south largely dried up.
There was a mixed reaction among traders in Derry city centre, with some reporting no change, while others started to feel the effects of Republic of Ireland shoppers staying closer to home.
Bobby Nicholson, manager of the Richmond Centre, said: “We have seen a big impact, with a significant drop in cross-border trade. We feel that there are other factors in this – not just the impact of the strong pound but the cost of fuel.”
He added that a rise in tourism has led to higher sales and said “this is encouraging moving towards the City of Culture year”.
Ray Hetherington, store manager for Debenhams, agreed that more tourists and the spin-off from the “vibrant buzz” in Derry was helping to offset the falling number of cross-border shoppers.
He said turbulent exchange rate fluctuations this year coupled with the prohibitive fuel costs had resulted in a significant downturn in euro cash transactions for many retailers in Derry.
But Austin’s Department Store seems to be retaining its southern customer base.
Spokesman Declan Hassan said: “We haven’t seen a drop in our Republic customers. We offer a very good rate at £0.80p and find this works very well for us.”
City centre manager Jim Roddy said that Derry and the wider north west region remained among the cheapest places to shop and stay anywhere in Ireland.
“Derry is extremely cheap for everything from retail to hotels to night-time economy such as bars, eating out, taxis.”
The chief executive of Londonderry Chamber of Commerce, Sinead McLaughlin, agreed. “Derry remains a value for money destination in relation to retail and tourism,” she said.
We’re the victims of our own success as eurozone flounders
By David Elliot
We have become a victim of our own success.
Because the UK didn't sign up to the euro, isn't having to hold the hand of Greece, Italy, Spain or the Republic and has at least shown some signs of economic recovery, the world's markets have placed sterling well ahead of the single currency on the list of the world's safer investments.
In fact, because the cost of bailing out those troubled European nations has been mounting by the day, the euro has joined the list of “wouldn't touch with a barge pole” currencies on foreign exchange traders' desks.
The result has been that the euro has steadily fallen in value against the pound and brought us back to levels not seen since the bad days of 2008 when we were in the depths of global recession.
And you could argue that it's not really justified, particularly when you look at the latest UK economic data which, ironically, placed us right back in negative growth as we complete the second leg of the dreaded double-dip recession.
Although it might be great for those of us heading to Europe on holiday, the strengthening of the pound is just another impediment to the economy's recovery.
A stronger pound means exporters from Northern Ireland to Europe have to lower the price of their goods if they're to compete and that generally means eating into already slim profit margins
So where is the euro/sterling exchange rate headed?
The most learned minds in the ‘forex' world aren't able to tell us with a great deal of certainty because most are waiting to see whether the bailed out European nations manage to stick to their harsh austerity measures.
Our biggest export destination is the one we share a border with and, probably luckily for us, is one of the bailout nations managing its recovery impressively.
But it's Spain and Greece in particular which are worrying investors and keeping the value of the euro down.
Until they show the same type of discipline in making cuts to public services, its unlikely the single currency is going to make any form of a meaningful recovery.
Given recent protests in both countries and voter preference of parties which oppose the austerity measures, that's not likely any time soon. In the meantime, get used to paying only 78 pence for a euro.
David Elliott is editor of the Business Telegraph