A study carried out by state agency Forfás has found that higher business costs for retailers justify only a 5% to 6% price difference between the Republic and Northern Ireland.

Tánaiste and Minister for Enterprise, Trade & Employment Mary Coughlan commissioned the study, which was published today.

The study was commissioned in response to claims by retailers that higher business costs south of the border were a big factor in the higher cost of retail goods south of the border.

The study looked at retail business costs to determine how their cost base compared with retailers in other jurisdictions.

In comparing Dublin and Belfast, the study found that while operating costs in Dublin were on average 25% higher than Belfast. But the study said operating costs accounted for only 20% to 25% of the total cost of a retail good, so such costs could only justify a 5% to 6% price difference between Dublin and Belfast.

The study compared costs at retailers in Dublin, Cork, Limerick, Galway, Belfast, London, Manchester and Maastricht in the Netherlands.

It found that the wholesale cost of goods for sale in stores was by far the biggest cost faced by retailers and accounted for 75% to 80% of their total costs. Operating costs in Dublin were higher than in all of the other locations surveyed except London and were 25% higher on average than in Belfast. The cost base in Cork, Limerick and Galway was more
competitive with locations in the UK.

Ms Coughlan urged retailers to do more the reduce the price difference between south and north. Referring to the euro's recent surge against sterling, she said retailers had factored higher operating costs in Ireland into their prices well before the euro's rise against
sterling since the last quarter of 2007.