The impact of Sunday trade on the economy

17 Nov 2017 10:06|Marcin Lipka

Sunday trade has been discussed in Europe for many years. Apart from Hungary, where attempts were made to restrict retail sales, several countries decided to liberalise trade on this day. What influence did this have on prices, employment and sales volume?

Marcin Lipka, główny analityk Cinkciarz.pl

OECD (Organisation for Economic Co-operation and Development) data shows that restrictions on Sunday trade exist in most of the old EU countries. However, their scale varies considerably. Austria implemented the highest restrictions. With few exceptions, most shops in this country are closed on Sunday.

In Germany, Belgium or France, some retail sales' conditions on Sunday trading have been liberalised and local authorities have the power to increase or restrict it. However, the trade restriction index of these countries is still fourth in the five-tier OECD scale.

Clear changes towards trade release have taken place in Denmark, Spain and Italy in recent years. However, despite many initiatives in several other countries, the reduction in regulations has not been successful. According to the EU Eurofound (focused mainly on the labour market), the restriction reduction was opposed by the Greeks. As much as 75% of the surveyed entrepreneurs were dissatisfied with the trade liberalisation, mainly highlighting the high operational costs on that day.

In 2015, on the initiative of British Chancellor of the Exchequer George Osborne, local authorities were to be given the opportunity to modify the opening hours of large-surface shops (currently they could be open for 6 hours on Sunday). After many months of debate, the changes in the law were not adopted due to a lack of support from the more conservative members of the ruling Tory. Outside the EU, liberalisation has also failed in Norway, where, according to the Eurofund reports, its trade unions and employers' organisations of retail trade have opposed it.

Hungary as an example

When the idea of restricting Sunday trade in Hungary came up in 2015, it triggered a broad discussion in Europe. Until then, as in many new EU countries, the OECD Restriction Index was at the lowest, the first level in Hungary (five-tier scale). After the decisions in Budapest, as defined, it climbed immediately to level five. Although the restrictions were in force for only one year, some conclusions could be drawn from them.

Eurofund's study (Hungary: Effects of a Sunday trading ban) pointed out that Sunday's retail sales fell by half. On the other hand, it increased by 24% on Thursdays and 21% on Fridays compared to previous data. The leading shops, in response to the limitations, extended the opening hours on the remaining days.

According to the trade unions quoted by Eurofound, the changes have had mixed effects on employees. Previously, they received a 50% higher wage for working on a Sunday, and after the changes, they received only 30% more for work outside the regular hours from Monday to Saturday. After a year, mainly due to the social opposition (even 80% of surveyed were opposed to the ban), the Hungarian authorities withdrew from the decision taken in 2015.

Inconsistent results of previous tests

The London School of Economics (LSE) Center for Economic Performance (CEP) published one of the most comprehensive analyses on the impact of Sunday's trade on the European economy in 2015. Its authors (Christos Genakos and Svetoslav Danchev) researched in the case of four aspects the countries where retail sales conditions were liberalised on the last day of the week - sales volume, market concentration, employment and prices.

Historical publications quoted by the authors presented ambiguous and often non-intuitive results in practically each of these issues. For example, the analysis of trade deregulation in the Canadian province of Quebec in the 1990s (Tanguay, Vallee and Lanoie) led to price increases in large shops and reductions in small shops. According to the authors, consumers have started to choose larger shopping malls more often, which, given the growing demand, allowed them to raise their prices. On the other hand, small shops had to lower the prices in order to compete and survive.

In turn, in Sweden, the first-millennium survey on sales condition liberalisation showed its increase by 5%. Other estimates carried out for Germany in 2014 did not suggest an impact on sales volume after the Sunday trading reduction.

Prices have not changed

Christos Genakos and Svetoslav Danchev in the study, "Evaluating the Impact of Sunday Trading Deregulation", prepared for CEP, instead of focusing on the analysis of a single country, they collectively approached changes. One group included countries where the deregulation of Sunday trade (Germany, Denmark, Spain, Finland, France, Italy and Portugal) has taken place in the last two decades. In the second group, there were those that have not changed.

In the case of one of the most important parameters for consumers, that is prices, no significant differences were observed. Facilitation in Sunday trade did not affect the cost of purchasing goods from the analyzed categories (food, clothing and footwear, household appliances).

The liberalization of trade for grocery shops has become statistically significant. The expenditure in this category increased. The demand for clothes, shoes and household appliances has not changed. The authors, however, have doubts whether higher demand for food is simply not a transfer of expenditure from other segments, which were not included in the study. Although this was not directly written in the report's summary, but the conclusions of other countries pointed out that, after reducing the restrictions on trade in shops, sales in cafes and restaurants decreased.

Employment increase

CEP conclusions show a noticeable increase in retail employment for the analyzed group. This especially applies to food, alcohol and other beverages, as well as bakery products. Deregulation, however, has surprisingly led to the decline in employment in clothing or shops selling household appliances.

In general, however, the number of jobs for the surveyed countries, which liberalized trade terms on Sunday, increased by 60,000. On the other hand, it is worth noting that this figure covers as many as 7 countries (Germany, Denmark, Spain, Finland, France, Italy and Portugal), where, according to Eurostat, 115 million people work. Only in Spain the number of jobs increased by half a million last year, due to the improving economic situation in the EU. With these values, the issue of working Sunday or not is of marginal importance for the economy as a whole.

 


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