Concerns over restaurant closures
VAT increases, spiralling energy bills and the increase in minimum wage are all contributing factors in the recent closure of restaurants, according to the Adrian Cummins, Chief Executive of the Restaurants Association of Ireland (RAI).
His comments come amid a recent wave of restaurant closures in the city over the past week. Much-loved Chinese restaurant and Cork institution, Tung-Sing on Patrick St. in operation since 1963, served its final meal to customers last weekend.In a social media post, the owners of the family-run restaurant said they were “heartbroken” about the closure, attributing it to the “constantly increasing cost and operating expenses”.
Pigalle Kitchen on Barrack Street, and in business since 2019, also pulled down its shutters for the final time last weekend, and nationwide, almost 50 food-led businesses ceased trading in November 2023 alone.
Speaking about the recent closures, Adrian Cummins said that there are four factors driving the downturn. “It’s a combination of wage inflation, VAT increase, supplier costs and energy costs,” he said.
The rate of VAT rose from 9% to 13.5% in September, and the minimum wage increased from €11.30 in 2023 to €12.70 since 1 January of this year, putting added pressure on restaurant and cafe owners.
“Our industry has gone through turmoil in the past three years, and now because of Government intervention in terms of wage inflation and VAT increases, it is pushing certain businesses over the edge to closure. Independents and small coffee shops won’t be viable unless there is government support in some shape or form,” he said.
“When you see a restaurant that was open for 60 years closing its doors, it’s a monumental blow. It’s a never-ending cycle of doom and gloom for our industry,” he added.
Warehousing scheme
Another factor that may have a big impact on further closures is the warehousing scheme. “There are businesses that owe tax back to the state, in terms of warehouse tax, that's coming down the tracks for them in May, ” said Adrian.
Many businesses in the hospitality sector who were affected by Covid availed of Revenue's tax debt warehousing scheme, where paying tax debt was deferred until business were in a position financially to deal with the debt. However, from May of this year will have to enter into a phased payment arrangement (PPA) to pay their debt, which may not be able afford to do. There is growing concern that there could be a spate of further closures once this takes effect.
“Our simple ask to the Government is to undo their actions,” said Adrian. “Reduce the VAT immediately back to 9%, and defer the pension auto-enrollment that is coming down the tracks in another twelve months. There should also be and exemptions for small businesses instead of them being tarred with the same brush as large companies and corporations,” he added.
Speaking about the closures Independent Cllr Ken O’Flynn described them as “very concerning” and called for “targeted interventions to address industry-specific issues.”
“Our city centre is a difficult place to do business in at the moment for restaurants and cafes. If you are in a position that you are renting it is almost impossible.
“We need to look at our VAT, and at how we are charging commercial rates to restaurants. Our rate evaluation has to change if we are going to assist businesses going forward. To keep our cities alive, we have to have restaurants and cafes and it has to be an experience. To do that Government needs to change its policies and change with the times to ensure that our city centres are kept alive,” he said.