Big and small, size matters

On the face of it, the argument about the cap on retail floor space revolves around a simple question

On the face of it, the argument about the cap on retail floor space revolves around a simple question. Will its abolition lure Ikea to a crossroads near us? Yes? Then say sayonara to the cap, lads, or whatever the Swedish is for cheerio, writes Kathy Sheridan.

Some of Ikea's stores are four times bigger than the size permitted under Irish planning laws, and they're threatening to take themselves to the North instead. Have we any choice but to dance to the Nordic tune?

B&Q, the British-owned DIY chain, also got in on the act this week. It already has its interminable hyperstore in Liffey Valley (that got through ahead of the cap), but still wants to carp about the Irish restrictions on floor space.

Clearly, size matters to these boys. But as it's only two years since the size restrictions were imposed, surely the rationale should be fresh in the Government's mind? Not at all. The responses have been marvellously contradictory.

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Here's Bertie (in a nice example of Bertie-speak): "If it's a case that large suppliers are prevented from getting in here and enhancing competition, then we should examine whether there are restrictions in the marketplace." Well, yes, Bertie, there are restrictions. You put them there yourself.

But did the restrictions stifle competition? B&Q intends to roll out 10 new stores across the land over four years. Its profit margins are surely in the rudest of health to sustain that kind of expansion, even with the cap still in place.

Yet the company insists that the 6,000 square metre cap is "anti-competitive". Where does this profit-seeking spiral end? Is there an argument here that goes beyond economics?

Presumably, if the cap were abolished today, B&Q's 10 planned stores would become 10 hyperstores. Is it not sensible to ask how this would impact on existing traders who make up the heartbeat of every town? In places already losing the traditional social glue of post offices and a Garda presence, is it wise or necessary to put the market-driven boot into what remains? The tone of recent commentary has been to sneer at the "vested interests" of those who oppose deregulation.

Are people who have worked hard to build up modest businesses in small communities not entitled to their rational fears? Is anyone who values the few indigenous remnants of Ireland's main streets not entitled to some properly researched answers, as opposed to being characterised as village idiots terrified of choice or the unknown?

Do any of these commentators have a vision of how this tiny, tourism-dependent outpost should look and feel in, say, 20 years' time? Is a hyperstore at every crossroads the best they can aspire to?

Where this argument assumes critical importance is in the supermarket sector. Suddenly deregulation - abolition of the cap and the Groceries Order-- is being paraded as the solution to supermarket profiteering that has continued for decades. Wal-Mart is the new must-have. Yet in four years, the German discounters, Aldi and Lidl, have stormed through Ireland and with just 45 outlets have already managed to seize 3 to 5 per cent of what we've always been led to believe is a fiercely competitive grocery market. And all without a single hyperstore.

The Pollyannas who believe that Wal-Mart and convenience shops can happily co-exist should look at some of Tesco's recent acquisitions: 862 corner shops around Britain, adding 1 per cent to its 25 per cent market share.

Commentators suggest that the Government's push for change is driven by concern over high inflation. Yet food inflation, according to the CSO, is only about 2.2 per cent, less than half that of general inflation. When last we looked, the Government itself was a major contributor in that area, and there's no sign of its deregulating itself.

So why the sudden rush on retailing? Because it makes the Government look like it's doing something?

Buyer beware. The food sector is not the same as Ryanair or the taxi industry. Of course, this is about the price we pay for food; but just as importantly, it is about the consequences of concentrating its control and distribution in the hands of a few international supermarket giants. As for the Government, why not resist the easy option for once? Instead of unleashing hyperstores on the landscape and eulogising the doubtful wonders of loss-leader retailing - whereby other items are hiked to compensate and small and medium-sized suppliers and primary producers are squeezed beyond endurance - why not examine supermarket pricing policies over the past two decades?

You've made a good show of it with the bankers in recent days, so why not the food moguls?

Here's your starter question. Last year pork producers, a breed utterly unsubsidised by the taxpayer, were getting 30 cent a kilo less for their produce than 20 years ago. Yet a kilo of over-the-counter back rashers more than doubled in price to about €10.60 during those same 20 years. Explain.