The Competition Authority has said reducing the cost of doing business in Ireland is the best way of helping suppliers in the retail sector.
The authority has published the findings of a study examining higher prices in the sector. It says increasingly price-conscious consumers are shopping around for the best prices and causing more competition between retailers and their suppliers. The authority says this has led to a fall in prices, with grocery prices down by more than 2% between January and May.
The Competition Authority says that since prices are coming down, the Government should reduce the cost of doing business in Ireland to help Irish suppliers compete and survive.
'Falling retail prices are proof that competition works,' said Bill Prasifka, the chairperson of the Competition Authority. He added that the Irish retail sector and its suppliers were going through 'a major and necessary adjustment'.
The body has found that many factors contribute to differences in prices between Northern Ireland and the Republic.
In the grocery sector, its report says retailers are putting pressure on suppliers for better deals, and that prices to consumers have fallen as a result. The authority says encouraging more retail competition through changes to the planning system would benefit consumers.
In the clothing sector, the report says it is more difficult for retailers to find alternative suppliers and re-negotiate prices, but consumers are benefiting from more and bigger discounts in sales.
On the pharmaceutical sector, the report says price reductions for consumers must come from the State reducing the prices it pays for medicines.
'The mark-up paid to pharmacies for medicines under the State's Drugs Payment Scheme - which effectively is also the mark-up paid by private individuals for medicines - should be brought down from 50%, one of the highest in the EU,' the report says.
Exchange rate savings 'not guaranteed'
The report looks at the sharp fall in sterling against the euro, which it says has led to expectations that imports from the UK should be cheaper. But the authority says a 10% rise in the value of the euro against sterling will not guarantee a similar fall in prices to the consumer. The eventual fall for consumers may be less than 5% or 6%, the report argues.
It points out that even though certain goods are imported from the UK, they are very often
not produced there, and may be paid for in other currencies.
The authority also says savings can be held back by suppliers or retailers if competition is weak.
Read the full report here
