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Hospitality professionals were severely disappointed when details of Budget 2025 emerged and showed no sign of a VAT reduction. The Restaurants Association of Ireland (RAI) has called the lack of Government response a “devastating blow” to an industry struggling to stay afloat.
In a statement released on 1 October, the association says that a total of 612 restaurants, cafes, gastropubs and other food businesses have been forced to close. They say the lack of a reduction in VAT in the budget will result in a further 1,000 businesses closing in the coming months.
“An April 2024 survey of 212 members of the RAI revealed that 74% of respondents would be forced to strongly consider closing their doors for good if the 9% VAT rate was not restored,” the statement reads.
The VAT had been reduced to 9% during the COVID-19 pandemic to help alleviate the disruption to business caused by repeated lockdowns.
In 2023, despite industry calls for the VAT to remain at 9%, Government reinstated the VAT to 13.5%. Unfortunately, while the pandemic eased, the economic slowdown in 2022 followed by severe cost increases in overheads and a lack of staff has made for a perfect storm for the Irish hospitality industry.
An energy support scheme totalling €170m has been announced to help hospitality businesses offset cost increases.
It is estimated that 39,000 businesses will benefit from this scheme, but the RAI says these grants – which will total approximately €4,000 per business – will be absorbed quickly.
“The €4,000 grant – amounting to just €77 a week – to be provided to hospitality businesses is insignificant, insulting and will not make a dent in the out-of-control cost base facing SMEs that this Government has presided over in the past two years,” the statement reads.
The VAT has been the big one, though, and it’s one we all agree on; it’s in the Government’s control to change
Barry McLaughlin operates Poachers Inn in Bandon, Co Cork. He says after years of engagement and lobbying, the Government have had “enormous opportunities” to reflect on the challenges facing the hospitality industry only to come up short when it matters most.
“I would say with certainty, in my own heart, that we’re dealing with the worst Government for hospitality in the history of the country,” he says.
“Post-Covid, we’ve all had to rebuild and added to that, the climate since 2022 has been challenging. Then, on top of everything, the Government drives up costs enormously by increasing taxes and introducing other cost increases.
"The VAT has been the big one, though, and it’s one we all agree on; it’s in the Government’s control to change.”
In operation for 18 years, Barry recalls the Government response to the recession of the 2010s as being vastly different.
“If you look back to 2011, the Government made decisions that gave some solace to us in the hospitality industry,” he says. “It was a difficult time for trading and they recognised that.
“The current Government have no such understanding. What they’ve thrown into this budget would amount to [approximately] one sixth of what the VAT reduction would have generated – it’s lip service. Our lives are being dictated by a bunch of civil servants and they have no idea the damage they’re doing.
“I think when you’re in it as long as we are, you find out very quickly that you’re not going to be very wealthy out of this business, but what we are really upset about is the absolute disdain that this Government has treated us with.”
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