On Ireland’s emptiest major shopping street, butcher Keith Clarke is mourning a loss of business.
“The fillet steak died a death,” said Clarke, 57, who runs a store on Grattan Street in the town of Sligo on the country’s west coast. His sales have dropped 40 percent since the economy imploded in 2008 and have further to fall, he said. “They’re buying the cheapest cuts now.”
Set against the backdrop of Benbulben mountain, which helped inspire the Nobel-Prize winning poet William Butler Yeats, Sligo illustrates the two-speed nature of Ireland’s recovery and the challenges facing the government as it prepares to exit the bailout the state entered three years ago. Taxpayers face 2.5 billion euros ($3.4 billion) in spending cuts and tax rises in the 2014 budget next week.
While signs of revival are emerging in Dublin, elsewhere the economy remains moribund. One in four stores around Sligo’s Grattan Street lie empty, the highest vacancy rate in Ireland, real estate firm CBRE Group Inc. (CBG) said last week. With consumer spending still falling, the central bank lowered its growth forecast for this year and 2014.
“Retail spending remains subdued,” said Alan McQuaid, an economist at Merrion Capital in Dublin. “Things aren’t going to get dramatically better until the labour market improves and disposable income increases.”
Irish retail sales have fallen in three of the last four years, as taxes rose, unemployment tripled and mortgage arrears surged following the worst real estate crash in Western Europe. Consumer spending, which accounts for about half of the economy, has fallen for the last two years, and will drop 0.4 percent this year, the central bank said last week.
The legacy of the crash is more apparent outside Dublin, European home to companies Google Inc. (GOOG) and Facebook Inc. Sligo, which brands itself Yeats Country because the poet spent summers in the area, is suffering more, and butcher Clarke reckons it will get worse with next week’s budget.
Finance Minister Michael Noonan said today tax increases and spending cuts will amount to about 2.5 billion euros next year, scaling back an earlier plan for 3.1 billion euros of adjustments, state broadcaster RTE reported.
“It’s going to drive sales further down, I have no doubt,” Clarke said. “If they have to pay extra taxes on fuel and God knows what else might come in, they’re just not going to have the money to meet everything.”
Regions outside Dublin had a greater reliance on the building industry before the recession and attract less foreign investment than the capital, according to Dermot O’Leary, an economist at Goodbody Stockbrokers. Instead, areas such as Sligo are trying to draw tourists, playing on the windswept landscape, lakes and Atlantic Coast beaches which helped inspire Yeats.
“Those regions are suffering a bigger hangover from the construction collapse because they had a bigger party,” said O’Leary. “Labour markets are weaker, consumer spending is weaker. They’re still feeling the effects of the downturn.”
Unemployment in Dublin, which accounts for about two-fifths of the economy, was 12 percent at the end of June, compared with almost 14 percent in the west of the country.
Nationally, the jobless rate, as measured by the Live Register, fell to 13.3 percent in September from a peak of 15 percent in February 2012. Irish consumers are more confident now than they’ve been in six years, KBC Bank Ireland and the Economic and Social Research Institute said in a report published last week.
Yet Ireland’s economic prospects are still tied up with developments elsewhere, and exporters may suffer as the global outlook dims. The International Monetary Fund said today growth worldwide will be 2.9 percent this year and 3.6 percent next year, trimming July predictions of 3.1 percent for 2013 and 3.8 percent for 2014.
Back in Sligo, it’s hard to see signs of revival. DNG Flanagan Ford, for example, dropped the annual rent on a former bagel store 70 percent to 12,000 euro ($16,355) a year to try and find a tenant for the vacant unit.
“If something happens in Dublin, it’ll be a number of years before it happens down here,” said Walter Murphy, an auctioneer for 30 years in Sligo, about 200 kilometers (124 miles) and a three-hour drive from the capital. “That’ll always be the case.”
Murphy, wearing a tie with black and white stripes that matched the Sligo flag, said he sold land for about 12,000 Irish punts (15,239 euros) per acre in 1994. An investor bought a nearby site for about 1 million euros per acre 10 years later.
A similar site would sell for between 50,000 euros and 80,000 euros per acre today, Murphy said. Prices in Sligo have at least “plateaued,” he said.
Empty retail units close to Murphy include the Sligo Kebab Shop, a former camera store and a 24,000 square-foot office unit that used to house the state-owned Electricity Supply Board. A restaurant near Grattan Street shut last week.
In Dublin, retailers on the main Grafton Street shopping thoroughfare including Hennes & Mauritz AB (HMB) and Abercrombie & Fitch Co. are expanding as shoppers return.
Clarke, the butcher who has worked on Grattan Street in Sligo for 43 years, said his customers are still swapping fillet steak for minced and diced beef.
“We’ve very limited industry in Sligo,” he said. “There’s nothing to generate jobs.”
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