I hadn’t seen anyone else on the blog link to this CSO publication from last week on cross-border shopping (based on a special module of the QNHS for 2009:Q2) which was brought to my attention yesterday. The results are interesting and the microdata associated with the module could be used for a nice research project.
Based on a quick read, the survey results suggest that the cross-border shopping issue has been substantially over-hyped by the media. A couple of highlights:
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Based on the estimates in the survey, total household expenditure on shopping in Northern Ireland between 2008:Q2 and 2009:Q2 was €435 million. This figure seems low relative to others that have been reported—for example, here.
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Outside of the border region, there are only very modest levels of cross-border shopping with average numbers of shopping trips less than or equal to one per year for all other regions. There is almost no cross-border shopping in the Mid-West, South-West and South-East regions.
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The average amount spent on alcohol per shopping trip was €32.
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Only 9 percent of respondents reported that they had shopped more in the North during the year up to 2009:Q2, while 1 percent reported that they had shopped less.
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Seven percent of respondents reported that they intended to shop regularly in the North in the coming twelve months.
16 replies on “CSO on Cross-Border Shopping”
@ Karl – it is good to see a reference to this CSO publication. At last we can talk about this issue without having to guess the numbers.
Yes is it is only a small proportion of the total household expenditure.
If one thought about this a little one would have come up with exactly the findings of the CSO. Unless you live close to the border or you have free travel (lucky for the North that the train line is back open before christmas) you are unlikely to go up regularly. Some will go up just to see if it is cheaper. Ikea would have brought some people up who then stopped in Saintfield or Newry on the way back. Those consuming a lot of alcohol might find a regular trip worthwhile. Of course those who live close to the border have been doing more and more of their shopping up north but certainly not all. It very much depends on where you live in the border region whether it is worthwhile going North.
Lets face it if it is price sensitivity that sends people North then they will work out the transport costs and weigh up the gain.
Overall, transport costs/distance explains a lot of the patter just as those of us who occasionally dabble in trade theory would have thought.
One thing that is rarely mentioned is the fact that there has been very substantial (legal) purchase of motor fuel in the South by people from the North, which would have given rise to significant tax/excise revenues that will drop off with the introduction of the carbon tax in the budget.
Is the methodology of the survey of a standard that we can be fairly confident it’s accurate?
@Karl Whelan
This move is very Marie Antoinetteish: “let them drink more cheaply”.
This is probably a major motivation, along with being a small digout for retailers and an even bigger digout for another group of government supporters, the publicans. Remember when Michael Martin stopped deregulation by citing the alleged increase in drink consumption it would cause? Does this mean – given the employment situation – we can now have the cafe bars?
@Dealga
Good question.
On the one hand, the methodology underlying the QNHS is of a very high standard. It is a very large survey carried out to very high standards by the CSO. It is what we rely on for our official measure of the unemployment rate.
On the other hand, the publication admits that it’s estimate of the amount spent across the border isn’t perfect. They only asked people about how much they spent on their last visit and then multiplied this by how many visits they made. Since the survey took place in 2009:Q2, it doesn’t factor in a higher average level of spending at Christmas. This would suggest it’s an underestimate, though it’s hard to know how much.
The report says:
“By combining information on frequency of trips to Northern Ireland and average expenditure on the most recent trip an estimate of total household expenditure on shopping in Northern Ireland has been calculated for the period Quarter 2 2008 to Quarter 2 2009. It is estimated that households spent a total of €435 million on shopping in Northern Ireland in this period. No adjustment has been made for seasonality. It should be noted, therefore, that this figure may underestimate total expenditure as the quarter leading up to Christmas would typically have increased activity.”
One way to try to get at this issue to make an adjustment would be to look at how much of a Christmas seasonal there is in the CSO’s retail sales data.
It will be interesting to see if there has been an acceleration in the trips up North as the recession bit. Have more people gone up this year than last year. Christmas VAT take might give some indication. It also depends where Sterling is at at a point in time. It got very weak as 2009 progressed.
From D18 it’s about a 2.5 hour trip to Belfast. My wife does it as a day out and she saves money on a big grocery shop. But it’s about a once a quarter trip.
I’d be more interested in someone finding out why a specific product e.g. Bars of galaxy chocolate (which she uses to bake a rather nice chocolate cake) cost nearly 40% less up in Sainsbury’s compared to Dunnes next door to us. To take one of many examples. It can’t be beyond the wit of some government department to get hold of wholesale prices in both jurisdictions.
@ Stuart
What are we paying the NCA for?
It’s disgraceful they don’t have an on-line web comparison site. What about a “virtual supermarket” where you just click on an item and it goes in the “trolly”.
On the same page a two column spread sheet. Shows the price in the ROI in one column and its equivalent NI price in the other column. Running totals according to placement of goods in the shopping trolly!
I wonder have they been ordered not to provide this on-line service. Maybe the government feels it would really lead to a mass exodus?
There is a conflict of interest here. On the one hand, they are supposed to be the National Consumer quango. However, they are remunerated by government!
How independent are they from the cash starved revenue and finance departments?
A secondary school class would have come up with this program by now.
Robert Browne
I think you know why: their supporters make too much money from the difference! Sadly, as the Irish economy continues to contract to the new “natural level” cost and wages will lessen.
I think that FF are very receptive to those who actually offer sympathy especially if a brown envelope is available. It certainly influences alcohol policy in the Republic.
On the other hand, they have wielded the knife very firmly in this budget, so good for them! Taxes will, as Garret the once good, or Chow and Lie? says will be addressed in future budgets!
One further issue (perhaps for the behavioural economists) is whether one might suspect people to under-report spending that’s been tarred with the label of ‘unpatriotic’ when completing the survey, or at least to round down when rounding is required.
Still, on the whole, nice to have numbers on this. Edgar’s point on commentators’ focus on the gross rather than net cost to the Exchequer is also very well made.
@Stuart Blythman
I’d say it is quite likely that the number of people going north to shop this December will be less than in December 2008, but even more likely that the number will fall sharply as 2010 progresses. However, this prediction is subject to there being no further major fall in sterling v the Euro in coming months. Were there to be, then the fall that I predict would still occur eventually, but would be delayed until sterling stabilised. If I may correct slightly what you said, sterling has actually been stable v the Euro in 2009, at around 90p to the Euro. So, my prediction for the coming months is dependent on that stability continuing.
My reason for predicting this is that the exchange rate-induced gap in prices north and south of the border has been very significantly reduced since December 2008 and is very likely to be further reduced in the coming months, and almost certainly at an accelerating rate. I give figures below that highlight this.
As you are a retailer, I’m sure you know far more than me about all this. But, for anyone else interested, I’ll explain why I predict this.
The main thing to understand is that there is a time lag between exchange rate movements and subsequent changes in retail prices resulting from those exchange rate movements. The time lag can be a year, two years, or even longer – it depends on the product.
So, if a country’s currency falls sharply, then, for a period of time after that currency fall, retail prices in that country are very low compared with the country whose currency stayed high. But, as time passes, this gap in prices is eroded. First, prices of almost all imported products in the country, whose currency has fallen, will rise. Second, prices of some imported products in the country, whose currency stayed high, will fall. As I said above, it can be a year, two years, or even longer before this process of price changes works its way through the system.
Now, lets look at the value of sterling v the Euro in recent year. I have compiled these figures from the Eurostat database.
2003 69.2p to the Euro
2004 67.9p to the Euro
2005 68.4p to the Euro
2006 68.2p to the Euro
2007 68.4p to the Euro
So, between 2003 and 2007, the exchange rate was very stable. But, then around August 2007, sterling began to plummet, giving:
Aug 2007 67.4p to the Euro
Dec 2007 72.1p to the Euro
Apr 2008 79.5p to the Euro
Aug 2008 79.3p to the Euro
Dec 2008 90.5p to the Euro
So, there was a fall of around 30 per cent in the value of sterling v the Euro between Aug 2007 and Dec 2008. But, since Dec 2008, the exchange rate has again been relatively stable. In fact, its almost identical this December (so far) to waht it was in December 2008:
Dec 2008 90.5p to the Euro
Dec 2009 90.6p to the Euro (average up to Dec 11)
So, following what I said at the start, it would be expected that the 30 per cent fall in sterling v the Euro between Aug 2007 and Dec 2008 would open up a massive price gap. Which, of course, it did, peaking in Dec 2008, which is when the number of people going north to shop probably also peaked.
But, again following what I said at the start, and given that there has been no further significant fall in sterling v the Euro since Dec 2008, it would be expected that this price gap would then be eroded, with prices falling south of the border and rising north of the border. And, again, this is exactly what has happened.
I have compiled the following figures from the Eurostat database. They are the price changes for most categories of retail items in Ireland and the UK between Dec 2008 and Oct 2009 (the latest available). For all categories, there has been a significant fall in prices in Ireland, and an even more significant fall when measured relative to the UK, where most categories have risen in price. Undoubtedly, this process has accelerated since October and will accelerate further in 2010 as VAT and alcohol excise duties in Ireland are reduced, VAT in the UK is increased, and the effects of the 2007/2008 fall in sterling v the Euro continue to work through. The effects of these price changes have not completely eroded the effect of the 30 per cent fall in sterling between Aug 2007 and Dec 2008. On average, they have eroded about half of it, with the effect being greater for some products than for others. But, as I said, the process will accelerate in 2010 and, barring a further major fall in sterling v the Euro in coming months, the price gap should be restored to its modest Aug 2007 level by the end of 2010.
price changes in Ireland and UK between Dec 2008 and Oct 2009 – note that the exchange rate has been stable since Dec 2008, so the relative price change is actually what cross-border shoppers would experience
food:
change in Ireland: -6.7%, in UK: -1.7%, in Ireland rel to UK: -5.1%
non-alcoholic drinks:
change in Ireland: -9.2%, in UK: +4.2%, in Ireland rel to UK: -12.9%
alcoholic drinks:
change in Ireland: +3.2%, in UK: +5.4%, in Ireland rel to UK: -2.1%
clothing:
change in Ireland: -11.8%, in UK: -3.4%, in Ireland rel to UK: -8.7%
footwear:
change in Ireland: -10.9%, in UK: +3.4%, in Ireland rel to UK: -13.8%
furniture:
change in Ireland: -7.0%, in UK: +1.2%, in Ireland rel to UK: -8.1%
carpets:
change in Ireland: -7.0%, in UK: -2.8%, in Ireland rel to UK: -4.3%
household textiles:
change in Ireland: -20.3%, in UK: +2.2%, in Ireland rel to UK: -22.0%
household appliances:
change in Ireland: -1.1%, in UK: +10.8%, in Ireland rel to UK: -10.7%
glassware:
change in Ireland: -8.8%, in UK: +6.8%, in Ireland rel to UK: -14.6%
non-durable household goods:
change in Ireland: -8.5%, in UK: +6.5%, in Ireland rel to UK: -14.1%
pharmaceutical products:
change in Ireland: -3.3%, in UK: +4.4%, in Ireland rel to UK: -7.4%
motor cars:
change in Ireland: -4.2%, in UK: +8.8%, in Ireland rel to UK: -11.9%
motor cycles and bicycles:
change in Ireland: -3.6%, in UK: +10.1%, in Ireland rel to UK: -12.4%
games and toys;
change in Ireland: -10.5%, in UK: +4.7%, in Ireland rel to UK: -14.5%
sports equipment:
change in Ireland: -1.8%, in UK: +4.9%, in Ireland rel to UK: -6.4%
plants and flowers:
change in Ireland: -4.4%, in UK: +3.8%, in Ireland rel to UK: -7.9%
books:
change in Ireland: -1.8%, in UK: +9.2%, in Ireland rel to UK: -10.1%
electrical appliances for personal care:
change in Ireland: -10.8%, in UK: +1.9%, in Ireland rel to UK: -12.6%
video and audo recording equipment:
change in Ireland: -12.4%, in UK: -0.8%, in Ireland rel to UK: -11.7%
computing equipment:
change in Ireland: -20.7%, in UK: -4.3%, in Ireland rel to UK: -17.1%
So, between Dec 2008 and Oct 2009 the price gap north and south of the border was cut by mostly double-digit amounts. As I said earlier, undoubtedly this trend has continued since October and will accelerate in 2010 because of the VAT and excise changes. The smallest fall in relative prices south of the border was for alcoholic drinks, which rose by 3.2% in Ireland and rose by 5.4% in the UK, giving a relative fall of just 2.1%. I’d say that the reason for this is that, because taxes make up such a large proportion of the price of alcoholic drinks, the price changes resulting from the exchange rate movement had relatively little efffect. Now that excise duties and VAT have been reduced in Ireland, but VAT increased in the UK, there should be a much larger fall in the relative price of alcohol south of the border in coming months.
@ Robert Browne
You can’t do away with the NCA. Bertie wouldn’t like it. 😥
“Celia Larkin, Businesswoman
Celia is the proprietor of Beauty at Blue Door, a successful beauty salon business. She is also currently on the board of the voluntary housing agency Cara.”
Thirteen Board members in all. Nine “Senior Executives”.
http://www.consumerconnect.ie/eng/Working_With_You/2008_NCA_Annual_Report.pdf
Why can this work not be undertaken by a dedicated team within the Department of Trade Enterprise and Employment?
Why do we need the quango?
Close on a €10mm annual budget.
“Ireland in 2006 had more than 800 quangos, 482 at national and 350 at local level, with a total of 5,784 individual appointees and a combined annual budget of €13 billion.”
“According to a survey carried out by the think-tank Tasc in 2006.”
http://en.wikipedia.org/wiki/Quango
Surely there’s room for a billion or so in “savings” by bringing these functions into central government.
@John The O
“I’d say it is quite likely that the number of people going north to shop this December will be less than in December 2008”
I’m not disagreeing with you about a reducing differential but you need to take people’s psychology into account. When things are going well the hassle of going up North to save a couple hundred of Euro is not worth it. Now we’re all in straightened times the psychology says yes it is. Hopefully you’re right, as I said the VAt figures for December should tell a story. But any retailer I know at the moment isn’t having a good Christmas so far. Obviously don’t know the reasons why, I’m sure it’s a mixture but the North may come into it.
@Stuart Blythman
I am not disputing your forecast that retail sales south of the border will be well down this Christmas. But, I would query whether, if the CSO estimates are correct, cross-border shopping is more than a very small part of the explanation. Do you have any information on whether or not retail sales are holding up better in Cork, say, than in Dublin? If cross-border shopping was a major part of the explantion for the fall in retail sales south of the border, then I’d have expected retail sales to be holding up better in Cork than in Dublin? Do you know if that is the case?
If the CSO estimates are correct, then I can’t really see that cross-border shopping is all that significant in terms of its effect on retail spending south of the border. Would the €435 million even be 1 per cent of retail spending south of the border? And, of that €435 million, lets say €100 million is accounted for by VAT, which again would be about 1% of the VAT take south of the border.
I’m assuming, of course, that the CSO estimates are correct. Ronan L is suggesting that, possibly, people in the CSO survey were telling porkies about how much they spent on cross-border shopping. That is clearly a possibility, although I have no idea if it is likely.
All this is peripheral to the main point of my post, which was to show that the north/south price gap is not static, but is currently being eroded quite rapidly and is likely to continue to be eroded unless there is a further major fall in the value of sterling v the Euro.
@John T O
No, I don’t have the answers to your questions as the data is not produced.
We get an overall country retail sales drop but not by region. They must have it and it would be interesting. Not sure why they wouldn’t do it. As I have said before I don’t like averages. Undoubtedly some retailers suffer more from the border trips than others.
I live in South Dublin and almost everyone I know has taken a trip up North this Christmas. But you’re right when I saw €435m I thought what is everyone getting excited about. It is a tiny amount, assuming it is true and we do get the opposite flow for petrol.
My feeling is we might get a major shake up in retail after Christmas if it is down by quite a bit.
@ Greg
Well, can they at least not get a few 5th year students from Loretto or Newpark to write the program for them? Won’t cost them a cent! However, I suppose the queues would then stretch all the way from Dublin to Newry.
He thinks that by reducing VAT by a half of one per cent that people will stop going to the North? This is just smoke and mirrors. It allowed him to say “I reduced VAT he just bought a sound bite! He knows It needs to come down to 15% and he should have got rid of stamp duty also.
I heard him say that he would loose 300 million for every reduction of 1%. But how does he know that? Some calculator told him I suppose! At this stage people are going there for therapy, a day out and they are treated “so well” by the shop assistants. Fair play to them. The Euro is still appreciating against sterling. You might as well try to hold back the tide.
Then the minister for ‘enterprise’ Mary Coughlan tells us that she buys her liquor in Brussels where it is 50% less. No I am not making it up!
Now that the petrol is carbon taxed people will just have to spend twice the amount and load the car to the gills. BTW the carbon tax is going to increase the price of food etc as every item in the shops has to be delivered by truck and vans OOps!
I believe there was no reference above to the budget statement on alcohol.
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Budget-drink tax cut, and VAT down 0.5pc
Wednesday, December 09 17:46:43
Big cuts have been announced by the minister in excise charges on drink.
Mr Lenihan said the changes were being made to combat cross border shopping.
“Recent CSO data show that 44 per cent of cross border shoppers buy alcohol,” he said.
“To protect exchequer revenue and stem the flow of cross border shopping, I have decided to reduce excise duty on alcohol products.
http://www.businessworld.ie/livenews.htm?a=2522911;s=rollingnews.htm
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I am stunned,. stunned that in these times, such a measure is taken, even by this government. How ironic that the CSO study preceded it.
John the Optimist
Take the point re relative improvement in prices in IRL V’s the UK. However,
1. The UK and NI are not one and the same thing. How do you know that UK price movements are being mirrored by the relatively poor “region” of NI?
2. Even if 1 above is correct, and this is plausible as NI (based) retailers may as well fatten up margins if they feel a large section of the market is “captured” in any event, your analysis does not allow for the fact that NI retailers, in order to maintain (southern) volume can just reduce their margins somewhat. Southern retailers – given the reduced margins of 2008 and further in 2009 – may not, now, have the same ability to react.
3. Irregular “big shops”, even family/friends taking turns, can reduce the time/money transport cost to a relatively insignificant factor.