VAT hike a spirit leveller
Alcohol now just 10% cheaper here than in Republic
Alcohol is now just 10% cheaper in Northern Ireland than the Republic after the latest VAT increases took effect here this week.
A survey by online newsletter Retail Intelligence found the price gap on bestselling spirits ranges from 1% to 15% between the Northern Irish supermarkets Asda and Sainsburys and Tesco in the Republic.
This compares with price gaps of 60-70% back in 2009 when cross-border shopping was at its peak, thanks to high prices in the Republic, a poor exchange rate and a much higher VAT rate in the Republic at that time.
However VAT in the UK has increased twice since then, rising from 17.5% to 20% on Tuesday, just below the 21% rate that now applies in the Republic.
Smirnoff vodka is now 15% dearer in the Republic compared to Northern Ireland, while Jameson is 12% dearer, Baileys and Hennessy are 10% dearer and Southern Comfort is less than 1% dearer.
Retail Intelligence said that similar prices across the basket of alcohol surveyed were found at both Asda and Sainsburys.
Northern Irish prices are likely to increase further in April after the Budget when Chancellor George Osbourne is expected to raise excise rates on alcohol by 2% over inflation.
The narrowing price gap means consumers from the Republic would save just €10 (£8.48) on a €100 (£84.80) basket of alcohol — and high petrol prices to travel north would wipe out most of this saving.
However, Cathal Austin of Newry's Quays Shopping Centre said that the kind of special offers on alcohol offered by Sainsburys to attract shoppers — such as two crates of beer for £14 in the run-up to Christmas — would not be hit by the VAT increase, which would only add €0.32 to the cost if they did.
He said that many southern shoppers came to Newry for things like food and children's clothes which were exempt from VAT anyway, meaning the increase would not impact on them.
“It's a buyer's market so stores will either try and pass these increases on to their suppliers or absorb them in their own profit margin; consumers aren't going to see immediate big increases in prices,” he said.