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Irish Times
a day ago
- Business
- Irish Times
Government to blame for hundreds of food businesses going under, restaurants say
More than 300 businesses in the food services sector closed in the first seven months of the year, according to the Restaurants Association of Ireland (RAI), which has laid the blame for the 'severe' pressure the sector is under squarely at the feet of the Government. The association, which is to meet Minister for Finance Paschal Donohoe next week, published a report on Tuesday which presented its case for cutting VAT in the sector from 13.5 per cent to 9 per cent in October's budget. The reduction would cost the State about €674 million, the latest Tax Strategy Group papers show, a figure the report described as 'small' in the context of the €9.4 billion budget package. It added the estimate does not account for the 'positive economic impact' of the measure. READ MORE The report flatly rejected commentary in recent months suggesting the sector is 'booming', and outlined its rationale as to why headline figures on which such assertions have been based ought to be treated with caution. Speaking at the launch of the report in Dublin, RAI chief executive Adrian Cummins said most businesses in the sector, which encompasses restaurants, takeaways, pubs, and coffee shops, are operating with profit margins in the region of one to two per cent. He said businesses in the sector have been 'blacklisted by the banks', relying on data from the Central Bank showing gross new lending 'collapsed' from €17 million to €6 million in March compared with the same period last year to support his argument. Restaurants Association of Ireland chief executive Adrian Cummins and economist Anthony Foley at the launch of the report. The RAI's report, which was based on research from former Dublin City University (DCU) economics professor Anthony Foley, identified 546 business closures last year, and 306 in the first seven months of 2025. 'We are confident we do not identify all closures,' the report said. The report pointed to Government measures such as minimum wage increases, the move to the living wage, higher employer PRSI, pension auto-enrolment, additional bank holidays, leave regulations, sick pay regulations, and water charges, as aggravating factors. 'It has to be recognised that, apart from market generated cost increases, the Government is responsible for much of the cost increases faced, and still to be faced,' the report said. 'The Government policies have significantly added to the sector's difficulties. It has paused some of the still-to-come measures but we recognise that this pause is temporary and short-term and these cost increasing measures will quickly come back.' Hospitality in Dublin: 'stress and burnout are getting worse in the industry' Listen | 27:20 The report said failure by the Government to cut VAT would lead to job cuts as well as 'unsustainable costs', which would in turn result in 'mass closures' across the sector. One 'solution' put forward by the report was to 'simply increase prices to customers', something it accepted would 'reduce consumer demand, downsize the sector, and negatively affect the appeal of Ireland for tourists'. [ 'These are huge, huge costs and we don't sell gold bars, we sell food,' says Kinara restaurant co-founder Opens in new window ] The report said cost pressures faced by the sector have already forced it to impose price increases, more of which will face 'significant consumer resistance' with 'adverse consequences' for individual enterprises and the sector as a whole. Additionally, the report suggested many business owners are relying on personal savings to stay afloat. 'Businesses are cutting back on opening hours, reducing staff hours, deferring maintenance, and postponing investment in upgrades or innovation,' it said. 'Many are drawing down personal savings or using short-term credit to keep doors open.' Only 7 per cent of restaurants had an increase in revenue in 2025 compared with the same period in 2024, while 69 per cent had a decline, the report said. Average payroll costs have increased as share of total turnover from 32 per cent to 39 per cent since 2022, while food costs as a share have increased from 28 per cent to 34 per cent over the same period.
Irish Examiner
a day ago
- Business
- Irish Examiner
Restaurants Association chief says Vat cut is not taxpayers 'subsidising' the food service sector
The chief executive of the Restaurants Association of Ireland has said he does not see a Vat reduction as taxpayers subsidising the industry, but rather as a correction to help businesses be more sustainable. This comes as the RAI publishes a new report, written by economist Anthony Foley, which seeks to make the case for the reduction in the Vat rate for the food service sector from 13.5% to 9% from January. The reduction in the Vat rate to 9% for the food services sector is expected to cost €674.6m. According to the summer economic statement last month, the Government plans on introducing an overall budget package of €9.4bn, which includes a tax package of €1.5bn and additional public spending of €7.9bn. The reduction in the Vat rate is expected to make up 45% of the overall tax package. Given the size of the tax package, and the proportion of it which is made up of this Vat reduction, the Government has much less space to cut taxes for taxpayers like it has done in previous budgets. On the Vat rate making up so much of the budget tax package, RAI chief executive Adrian Cummins said: "I don't see it subsidising the industry,' but rather a 'correction' to bring it down to a level comparable with the rest of Europe. He added the reduction would help restaurants be more sustainable and more competitive when it comes to tourism spending. Mr Cummins said he was 'quietly confident' the Government would implement the reduction, saying it was in the programme for government. According to the report, small firms, employing between one and nine people, account for 76.6% of the food service sector. However, the proposed Vat reduction would apply to all food service businesses across the country, including some of the larger fast food chains that operate in Ireland. The RAI report cited data from Bord Bia, which showed of all food services companies, 37.4% were categorised as 'quick service, fast casual, and food to go' while 11.7% were categorised as full-service restaurants. Mr Foley said the Government could, if it wanted to, target the Vat reduction at smaller companies, but it would be 'difficult to manage and implement'. "The Government could do it if they developed the systems to do it. So you could say, firms with more than a certain turnover pays a higher Vat than others,' he said. When asked why the RAI was not advocating for a more targeted approach to help smaller Irish food service business, rather than larger chain fast-food restaurants such as McDonalds, Mr Cummins said 'McDonald's are a member of the association'. He also added that under EU law it would be illegal to have one Vat rate for fast food operations and another for full-service restaurants. The RAI said businesses were experiencing a weakening of operating margins with Central Statistics Office data showing food services sales volume and value are declining in 2025. This coincides with a decline in tourism, and tourist spending, to the country, experienced throughout much of this year. Mr Foley said the primary objective of this Vat cut was to reduce the cost of doing business, which enables firms to have better margins and reduce the chance of price hikes in the future. Mr Cummins said there had been 307 restaurant closures to date this year. The RAI represents 3,000 members out of about 20,000 food service businesses in Ireland.
RTÉ News
a day ago
- Business
- RTÉ News
Restaurants Association of Ireland repeats call for 9% VAT rate
The Restaurants Association of Ireland, supported by economic research from economist Tony Foley, today launched a significant report making the case for the restoration of the 9% VAT rate for food services and addressing recent criticisms of the policy measure. The Restaurants Association of Ireland said it rejects some recent commentary and claims questioning the desirability of restoring the 9% rate. It said the restaurant sector has faced significant cost increases from market-priced inputs and Government induced costs, with independent assessments confirming these pressures. Small firms dominate the sector, with 76.6% of hospitality enterprises employing between one and nine people, it said. "These firms are particularly vulnerable to market and policy shocks - just 0.4% or 73 out of 20,213 hospitality enterprises are considered large businesses or food chains," it added. Recent data has shown declining food services sales volume in 2025, weak lending to restaurants, and underperforming tourism related restaurant activity. "The sector is not booming, and margins are under extreme pressure," it stressed. The report emphasises that food services are a cost-of-living issue for the wider population and the restoration of the 9% rate is justifiable in both a macroeconomic context and a strategic economic development context. Even with a 9% VAT rate, the hospitality sector would continue to contribute significantly to the economy. The association said the CSO Monthly Services Index shows food services sales volume and value are declining in 2025. Speaking on the launch of the report, Adrian Cummins, the CEO of the Restaurants Association of Ireland said the 9% VAT rate is critical for thousands of restaurants and cafés across Ireland. "Businesses have built their financial planning around its promised return, and any delay or uncertainty risks undermining that planning," Adrian Cummins said. "The financial model for food businesses is broken and without the reinstatement of the 9% VAT rate many just simply will not survive," he said. "With 99.6% of food businesses in Ireland classified as SMEs, the Government must honour its commitment to the 9% VAT rate and safeguard more than 20,000 enterprises and the 220,000 people they employ," he said. "Only 73 of these businesses or just 0.4% are considered large companies. Supporting SMEs is critical for the sustainability of our sector and the wider economy," he added. Anthony Foley, Emeritus Associate Professor of Economics at DCU and economic researcher on the report, said the sector plays a significant role in both regional and national employment and economic activity. "However, its business model has been severely undermined by rising labour and input costs, much of which stem from government policies," he noted. "Without a supportive measure like 9% VAT the sector is like to face a substantial decline based on market forces and non-viability at current prices. In addition, 9% VAT supports ordinary consumers as well as thousands of small enterprises," he said.
Irish Examiner
18-07-2025
- Business
- Irish Examiner
A sobering snapshot of a restaurant industry grappling with rising costs
'To want to own a restaurant can be a strange and terrible affliction,' said American celebrity chef and author of Kitchen Confidential, Anthony Bourdain. 'Why would anyone want to pump their hard-earned cash down a hole that statistically will almost surely prove dry? After many years in the business, I still don't know.' Those prophetic words may well hang heavily over the restaurant sector this year, given that 150 food businesses have permanently closed their doors in the first three months of 2025. When the Restaurants Association of Ireland recently unveiled the findings of its Cost of Doing Business 2025 survey, the results offered a sobering snapshot of an industry grappling with rising costs, shrinking margins and growing uncertainty about the future. This is exclusive subscriber content. Already a subscriber? Sign in Take us with you this summer. Annual €130€65 Best value Monthly €12€6 / month
RTÉ News
02-07-2025
- Business
- RTÉ News
Further closures and jobs losses if VAT not reduced for food-led hospitality
The Restaurants Association of Ireland is warning of further closures and job losses if the VAT rate for food-led hospitality businesses is not reduced. The RAI said it is "essential" that the Government reinstates the 9% VAT rate, which is currently at 13.5%. The Government has pledged to reduce the rate. In its pre-budget submission, which is being launched today, the Restaurants Association of Ireland said the coalition "must fulfil its promise to reinstate the 9% VAT rate for food-led hospitality businesses or face the consequences of further closures, job losses, and long-term damage to Ireland's tourism economy, particularly in rural towns and villages." The RAI said such a move is "needed to safeguard" thousands of restaurants, cafés and gastropubs across the country, as it said over 200 restaurants have already closed in 2025. It said the current 13.5% VAT rate in Ireland is "one of the highest VAT rates on food services in the EU". "The estimated €545 million cost of restoring the 9% VAT rate should be viewed as an investment, not a loss." The CEO of the Restaurants Association of Ireland is calling for Budget 2026 to be "a turning point". Adrian Cummins said temporary measures are not enough. "We need a pro-SME, pro-hospitality budget that supports survival now and enables long-term growth." "Bringing back the 9% VAT rate, as promised by Government, is essential. Tánaiste Simon Harris called it a solemn commitment, now it's time to deliver," Mr Cummins added. The RAI is also calling on the Government to align future increases to the National Minimum Wage with inflation. It is also seeking a halving of the employer PRSI rate for one year "to relieve cost pressures" and urgent insurance reform to address what it describes as "unaffordable liability premiums".
