The Irish restaurant sector is “currently in crisis,” with several independent food-led businesses being forced to shut their doors for good every day. That is according to the Restaurants Association of Ireland (RAI) who issued the warning this week.
The RAI, which was formed to represent the industry at government level on issues of importance to Ireland’s restaurant industry have urged the government to intervene with immediate effect.
“Otherwise more and more food led businesses will close their doors,” the organisation’s CEO Adrian Cummins said this week.
Mr Cummins said that wage inflation, VAT increase, warehouse tax and growing supplier costs are “crippling” the sector.
The association said that action must be taken, or else Ireland must brace itself for an “inevitable tsunami” of restaurant and café closures in 2024.
Over the weekend, the RAI issued a five-point plan advising the government on what must be done to help the sector.
This includes the reinstatement of a 9 per cent VAT rate – with the association saying it believes rhat the 50 per cent increase in the VAT rate for the hospitality sector, from 9 to 13 per cent, is the “number one” cause of closures in the industry. The association has strongly lobbied for the VAT rate to be returned to 9 per cent.
The plan also includes the phasing of warehouse debt repayments, with the RAI saying that revenue commissioners must give businesses a “viable” opportunity to pay back what they owe over a ten-year period in order to avoid liquidation.
In addition, it called for a support package for small, independent businesses which would help them to stay open through grant aid support. The lobby group warned that hikes in wage and energy costs presently “continue to cripple” the labour intensive, food led hospitality industry in Ireland.
It also said areas suffering from reduced tourism needed government help, due to reduced footfall, tourism and custom due to efforts to house refugees. Finally, it said that additional costs which will be incurred due to the government’s pension auto-enrollment scheme, to begin this year, will be “too much” for many businesses, as it called on this scheme to be delayed until the second half of 2025.
Before Christmas, the Restaraunts Assocation of Ireland said that just under 50 restaurants, cafés and other food-led businesses closed in November alone.
The association described the figure as “deeply distressing,” and blamed rising costs and reduced consumer demand.
“The food services industry continues to grapple with what is being described as a perfect storm of increased costs and reduced consumer demand,” it said.
“Operational costs for small, local restaurants, cafés and food-serving pubs – which include food costs, energy costs, insurance costs and VAT, the rate of which rose from 9% to 13.5% in September – have skyrocketed, while a recent Bord Bia report found consumers are eating out less often”.
Speaking in the Seanad last month, Senator Sharon Keogan highlighted hospitality closures, saying that a “scary situation” was faced by businesses going into 2024.
“A scary situation is going to take place next year for businesses, whether this involves the living wage, with increases in the minimum wage coming in January 2024, pension auto-enrolment, statutory sick pay provision, PRSI increases or the provisions of various legislation that must be implemented next year,” she said.
“There will be the Work Life Balance and Miscellaneous Provisions Act 2023 and parental leave being extended to nine weeks. All these initiatives will be hitting small businesses next year and will cost them €4 billion.
SMALL BUSINESSES ‘HEADING INTO A VERY SCARY PLACE’
“The Department stated yesterday that it is going to give some €257 million to rateable businesses. I actually could not believe there are only 140,000 rateable businesses here. I somehow thought it was more,” she added.
“This €257 million, though, is a drop in the ocean compared to the support these companies are going to need come January 2024. I feel we are heading into a storm for these small businesses here come January and February 2024.
“There is already talk of there being an economic downturn. For small businesses, we are heading into a very scary place come 2024.”
Last year, during a Dail debate, Taoiseach Leo Varadkar addressed the issue of tourist towns being impacted adversely by the refugee crisis.
“We acknowledge this is a problem,” he said.
“There are people from Ukraine and from all over the world in all parts of the country. I believe Dublin has more than any other individual county, but on percentage terms the biggest number is down the western seaboard, including counties like Clare, Donegal, Kerry and Mayo. We need to acknowledge that.
Mr Varadkar said that while “the accommodation providers are fine,” the pubs, restaurants and attractions were “losing out.”
“This is clear. We have some data on that. Some will be able to pivot and adapt and some will not. Either way, they will need help.”
The government is set to examine business supports following recent warehouse closures, including four in Cork city in the last 10 days, with all shuttered businesses citing rising costs.
The debt warehousing scheme could be examined in an effort to help businesses, with an estimated €1.7 billion owed in warehoused tax debt from the Covid period.