Morning business news - April 25Thursday 25 April 2013 10.48
BLACK MARKET COSTING ECONOMY UP TO €1.5 BILLION A YEAR - Illicit trade, or black market trading, could be costing the economy up to €1.5 billion a year, according to a study by Grant Thornton and Retail Ireland. They looked at four sectors with which the trade is most associated - fuel, cigarettes, digital and intellectual property and the pharmaceutical sector.
Brendan Foster, a partner with Grant Thornton, said the cost break down was €1 billion in terms of lost revenue to the exchequer and over half a billion in losses to business. He said the illicit trade in pharmaceuticals is a global issue which has a knock on effect here given our reliance on pharmaceuticals. ''Globally as much as 10% of overall medicine consumption is of products that have been traded illicitly. That has a knock on effect on exports, corporation tax and jobs in the economy,' he explained.
Mr Foster said there was generally an upsurge in consumption of illicitly traded products in a downturn. "Illicit trade is encouraged by the gap in terms of the cost of producing items and the cost to the consumer. 78% of the cost of tobacco, for instance, is government tax receipts. There is an opportunity for criminals to create significant profit. In harsh times, consumers are looking to buy products at reduced price. Up to 19% of product consumed in that sector is illicit," he said.
Mr Foster said consumers must understand that illicit trade is not a victimless crime. He called on the Government to come up with a joined up approach across the various sectors and develop a plan to tackle what is a significant economic problem. "In the context of receipts and savings on austerity, this is a significant saving by any measure."
MORNING BRIEFS - Aer Lingus hopes to shed another 100 staff between now and the end of the year. In its interim management statement, chief executive Christoph Mueller said the company was launching a voluntary severance programme with a goal of reducing staff numbers by 100. The airline reported an operating loss before exceptional items of €45.5m in the first quarter. Revenue was up 3.3% to near €260m.
*** Preliminary growth estimates for the UK for the first three months are due out this morning and they will reveal if the UK has in fact slipped into a triple dip recession. The UK economy contracted by 0.3% in the last three months of 2012 - two consecutive quarters would put the economy back into recession for a this time since the downturn hit five years ago. Economists however are expecting that the UK will avoid the triple dip this time. On average, their predictions are for 0.1% growth. The IMF last week encouraged Chancellor George Osborne to rethink his austerity programme and perhaps change course.
*** South Korea's economy grew at an unexpected rate of almost 1% in the first three months of 2013 - a two year high. The increase came despite a move by the government earlier this year to cut its growth forecast for the year amid a slowdown in exports. But the export sector actually grew by over 3% in the quarter. The growth was helped along by a rebound in construction and investment. The data is likely to help allay fears over the health of the Korean economy which recorded a contraction of 1.2% in the last quarter of 2012.