NEARLY 600 food businesses have shut their doors permanently since the VAT was increased by 50 per cent last September, according to the latest figures.
The Restaurants Association of Ireland revealed that the number of restaurants, cafés and other food-led businesses forced to close since the hospitality sector’s VAT rate was increased from nine to 13.5 per cent has reached a total of 577.
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A total of 45 restaurants, cafés and other food-led businesses ceased trading in July.
In a recent survey of 212 members of the RAI, an alarming 74 per cent believe they will have to close their businesses if the VAT rate on food is not reinstated to nine per cent in October’s Budget.
Some 66 per cent of respondents admitted they would have already shut their doors if not for the ongoing campaign advocating for the return of the lower VAT rate.
A report, titled The Economic Impact of Restaurant Closures, by economist Jim Power, found that the average closure costs the State and economy up to €1.36million, with each closure also resulting in the loss of 22 direct jobs.
The RAI has long called for a return of the nine per cent VAT rate for food-led businesses to ensure long-term viability for the industry – a proposal the Department of Finance estimates would cost in the region of €545million a year.
According to the representative body, closures have now reached a level that means the higher rate of VAT on restaurants and cafés has started to actually cost the State money because of unintended knock-on economic impacts which the Department’s modelling fails to acknowledge.
Adrian Cummins, CEO of the Restaurants Association of Ireland, said: “While the pace of closures has slowed slightly during the summer compared to the tsunami we witnessed at the beginning of the year, this was expected.
“Many food-led businesses are holding on by a thread, hoping the busy season will provide some relief and that the Government will act in October’s Budget to restore the nine per cent VAT rate.
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“But the reality is that these businesses are still in crisis and, without a return to the lower VAT rate, we are guaranteed to see another wave of closures as we leave the summer behind and move into the hospitality sector’s quieter months.
“The current situation is unsustainable and our members face a broken model. Restaurants are busy but costs have risen to an extent that has resulted in margins all but collapsing.
“Budget 2025 will be judged by the entire hospitality industry solely on the Government’s decision to reinstate the nine per cent VAT rate on food or not.”
