Irish Hardware & Building Materials AssociationElmville, Upper Kilmacud Road, Dundrum, Dublin 14.

Tel – 01 2980969 Fax – 01 2986103 Email – info@ihbma.ie www.ihbma.ie

PRESENTATION BY THEIRISH HARDWARE & BUILDING

MATERIALS ASSOCIATION

TO

HOUSES OF THE OIREACHTASJOINT COMMITTEE ON ENTERPRISE

TRADE & EMPLOYMENT

SUBJECT

TRADE AND EMPLOYMENTIN THE HARDWARE AND

BUILDING MATERIALS INDUSTRY

25th MAY 2010

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About IHBMA

Chairman and members of the Committee - good afternoon and thank you for receiving our delegation and submission today. My name is Jim Copeland, Chief Executive, IHBMA. My colleagues are John Murphy, President IHBMA; and Director John Murphy Castlerea Limited; and Brendan Maher, Vice President IHBMA, General Manager, McDonogh Trade Home DIY, Ballybane, Galway.

The Irish Hardware and Building Materials Association (IHBMA) is the national representative body for hardware, DIY, homewares, home décor outlets, builders’ merchants, electrical stores, and garden and agricultural suppliers, at retail, wholesale and manufacturing level.

We currently represent 585 members who, between them, employ 21,500 people in 790 retail outlets located throughout the entire country. We are an inclusive body, representing the interests of both independent single-store outlets, as well as those of the larger national retailers.

In addition to representing members' interests at all levels to Government, semi-state and regulatory bodies, we in turn are a reliable source of industry information for government, consumers, media and other interested parties. We are also a nominating body for elections to Seanad Éireann, are affiliated to the International Federation of Hardware & Housewares Associations (IHA), and are members of the European Association of National Builders Merchants Associations (Ufemat).

Employment Figures

In Ireland the retail and wholesale sector is a dynamic, innovative and vital part of our economy. Nationally it employs over 14% of all those employed in Ireland, and accounts for 11% of the value added in the economy.1 In line with the latest ESRI figures for the sector, we agree that employment will bottom out at approximately 260,000 for 2010 (down 53,000 from its peak in 2008), before gradually rising to reach in the region of 290,000 at the end of 2016.

As these figures confirm, the retail and wholesale sectors we represent are an attractive proposition for employment for the foreseeable future. Even with the job losses occurring at the moment, there is a replacement demand of almost 70,000 in the retail sector each year1. Obviously, some of these positions will be filled by people who have lost their jobs elsewhere in the sector, but first-time industry entrants will also be taken in.

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Progressive & Self-Motivating

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Being innovative and progressive, our retail employers very often recruit people without previous experience of the industry and train them up themselves. So, a labour market initiative targeting this sector has the potential to be more effective than for most other sectors of the economy.

Retail/trade counter assistants account for more than half of those employed in the sector with many positions requiring significant skills in areas such as sales, customer service, staff supervision, product knowledge, administration and retail finance. As an organisation we are very pro-active in this regard and run a whole programme of educational seminars and workshops, not just for our members but also for their employees.

We also encourage members to devise their own in-house staff development programmes and our objective going forward is for all training modules to be FETAC-accredited where appropriate.

While members are finding it increasingly difficult to allocate resources to training because of reduced sales, pressure on margins and cut backs in staff numbers, they are still persevering. We also acknowledge the support of the Skillnets programme and the Irish Hardware Skillnet has been of great benefit to members.

As the foregoing illustrates, we in the IHBMA are progressive, professional and self-motivated. However, there are adverse trading conditions that are very much affecting our retailers and suppliers currently, including great difficulty in securing bank finance, upwardly only rent reviews, regulatory and local authority costs. But today we will focus on just two critical issues. One which potentially will have a major adverse effect and one which is currently causing our members considerable financial hardship.

The former is the disruption to our supply chain due to a proposed imposition of Carbon Tax on solid fuels and secondly the lack of enforcement in relation to Prompt Payment Legislation.

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Supply Chain Disruption

If the Government decide on an implementation of Carbon Tax on solid fuels (coal and peat briquettes) as is our information, for the coming Winter season, this would present a clear and present danger in terms of probable and significant job losses within our membership and industry and would have very serious implications for our chain of distribution.

We are also convinced that, far from having a positive impact on the environment and the rebalancing of the tax base, it would have seriously negative implications across a range of categories in the distribution and sales areas. These include:—

- Job losses of up to 1,200 gainfully employed personnel. Clearly this is a potentially seismic event which will have dire consequences across our industry. As indicated already, our membership is broadly based and our members employ people throughout the 26 counties. This would be very similar in scale to the loss of a multinational.

- Obviously such losses will also mean very significant lost contributions by way of direct and indirect taxes and an increase on the burden to the state as a consequence of increased unemployment.

- The sale of domestic solid fuels between the key period of September to March is a critical footfall driver for our industry, which anchors and sustains many businesses during a difficult trading period.

- We are already seeing severe disruption to the legitimate supply chain and a decrease in sales as a consequence of the increase in non-compliant fuel imports from Northern Ireland and further afield.

- These fuel imports from Northern Ireland, which already enjoy a reduced VAT rate (Ire. 13.5% - UK 5%) — also enjoy a regime where their sulphur levels are allowed to trade at 2% where we are constrained at .7%, they will now have a significant carbon tax rate advantage as well.

- This is a significant advantage when you consider that Northern Ireland/UK do not pay any Carbon Tax on domestic solid fuel as an exemption was granted on these products in 2000. A fact not generally known in the South, this was also adopted by France in March of this year.

- Security of supply: The currently dependable supply of solid fuel sourced nationally will be adversely impacted, and will have the result of driving people back into the untraded sector and undoing the progress made in phasing out imported solid fuels with higher sulphur content.

We appeal to the Minister for Finance for a common sense approach to maintain the current status quo on carbon tax regarding domestic solid fuels, at least until the “Robust Mechanism” he suggested last year be clearly outlined and implemented. We have seen what has happened in the oil/cigarette and alcohol industries with cross border smuggling over the years, and do not want to see the same thing happening with solid fuel. If it is to be implemented at some future date, we suggest that it

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would be over a period of years, allowing for its smooth transition, both locally and nationally.

Even as the situation currently stands, large quantities of higher sulphur content solid fuel are avoiding VAT and being brought across the Border daily. We also have evidence from our members, which proves that some merchants in Northern Ireland are accepting legitimate VAT numbers from customers for other products including timber for roofing houses, bathroom suites and other large value items without substantiating that customer’s right to use that VAT number. We are currently in discussions with Revenue on both of these matters.

We also ask the Minister for Finance to introduce a winter fuel smart card, or voucher scheme, so those who are entitled to use them, can purchase solid fuel products only, and from registered tax compliant companies. Currently the allowance is paid by way of a top-up on the recipients current payment and can be spent on anything, not exclusively on solid fuel.

We would be happy to engage with Government in relation to exploring avenues around the practicalities and mechanics of building a “robust mechanism” as we will after all, be the industry which will be called upon to drive it.

To reiterate, we are gravely concerned in terms of the implications for our industry if the Carbon Tax is to be introduced on domestic solid fuels and the potential impact it will have in relation to up to 1,200 people being made redundant as a direct consequence. Let no one say they were unaware of this consequence after the event, as these facts are now laid before your committee.

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Prompt Payment Legislation

Despite the introduction of the Late Payment in Commercial Transactions Regulations 2002, the legislation is not working in favour of small and medium-sized enterprises. Numerous surveys have highlighted this fact, indicating that small and medium enterprises are having to wait an average of 76 days2 for payment.

The indisputable evidence is that large business organisations, along with some Government agencies, are delaying payments to cash-strapped small companies in all sectors, including ours. Unfortunately, the Department for Enterprise Trade & Employment has failed to take action in this regard.

With the deterioration in late payments across the board, cash-flow across our entire sector is drying up. This, coupled with a lack of availability and credit terms from Irish banks, is placing many of our members in both the retail and wholesale sector at severe risk. Unless addressed immediately it will result in inevitable closures and job losses.

We urge the Minister to review the Prompt Payment Legislation as a matter of urgency with a view to amending and enforcing it to assist small and medium enterprises. Currently it is optional rather than mandatory, with an ability to “contract out” being availed of by some. This is unacceptable.

We are aware of a previously-drafted, but not used, national survey being available to the Department of Enterprise Trade & Innovation. This could serve to benchmark and quantify the scale of the current problem within all sectors.

We would like to see a corporate social responsibility charter on prompt payment championed by Government, and introduced across Government departments and semi-state organisations. This could also be advocated to multi-nationals and large companies, and then cascaded down the supply chain to medium-sized businesses and small to micro organisations.

We ask the committee’s assistance in progressing these two very important areas to the Irish Hardware & Building Materials Association and we are very pleased to take questions on these, or any other issues, you may have.

1 Source – Expert group on future Skills needs – Forfas – April 2010

2 Source – ISME Credit Watch, Spring 2010

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