A new survey conducted by Interpath Advisory and the Restaurants Association of Ireland (RAI) has shown a concerning pessimism within the industry due to the increased VAT rate.
More than nine in ten respondents said that the reduced VAT rate of 9% for the food-led hospitality sector, which increased to 13.5% last September, had been critical to the survival of their business.
Over two thirds of respondents (69.8%) to the survey said that trading conditions had deteriorated for them over the past 12 months, and the majority (62.8%) said that their business had traded below expectations.
‘Weighing Heavily’
“Inflation has supressed spending per head, and – coupled with wage increases, input prices and higher borrowing costs – margins are being squeezed and leaving little room for managing debts,” said Brendan O’Reilly, the director of Interpath Advisory in Ireland.
“The 9% VAT rate for the food-led hospitality industry was a lifeline for small, independent restaurants and cafes, and the reintroduction of the 13.5% rate is clearly having an impact and weighing heavily on restaurateurs.”
Insolvencies
The figures come after there were 47 insolvencies in the food-led hospitality sector in the first quarter of 2024.
The survey shows that confidence across the restaurant industry is being tested, as more than half (51.2%) of respondents expect that their revenues will decrease over the coming 12 months, and the vast majority (90.7%) said that their profits would likely fall.
Job Cuts
The pessimism could also impact jobs, with nearly two thirds (64.0%) of those surveyed expecting to reduce job numbers over the next year.
When asked to identify the greatest threat facing the viability of their business, the VAT hike for restaurants, cafes, and other food-led businesses last year was the most common response (68.6%), followed by wage inflation (12.8%) and weak consumer spending (7%).
‘Seriously Concerned’
“Following this survey, it is now beyond doubt that restaurateurs are seriously concerned for the future of their businesses,” said Adrian Cummins, CEO of the Restaurants Association of Ireland.
“My hope is that the government acts before it is too late and we lose so many cherished restaurants and cafes that play a vital social role in local communities.”
