The LVA had been very vocal about the rising cost of energy prices and the knock-on effect this is having on pubs in the run-up to the Budget. Publicans countrywide had reported steep increases already being applied to their bills, with some noting a four-fold increase. Further energy cost increases are anticipated across the sector in the months ahead. Accordingly, this was a priority measure for the LVA and its members in Budget 2023.
Speaking about the impact of the Budget on the sector LVA Chief Executive Donall O’Keeffe said, “The energy grants seem balanced and comprehensive, which is the type of positive and effective measure that was required. The rise in energy costs has been the financial issue impacting pubs across Ireland the most in recent months and we expect that will become even more acute as the Winter rolls in. Action was needed to address this problem or there would have been flickering lights in pubs at more than just last orders. So we’re very pleased to see a scheme of this scope announced in the Budget.”
It was also confirmed there will also be a 50% reduction in the cost of the Special Exemption Orders required by all licensed premises that wish to open late.
“Pubs and all licensed venues have to pay an additional charge of €410 to the Government for every night they wish to open late,” said Donall O’Keeffe, ”Cutting that by half makes sense as the Government seeks to encourage the further development of the Night Time Economy. We will be continuing to campaign for the complete abolition of the outdated SEO system in the upcoming licensing reform bill.”
The Vintners’ Federation of Ireland too welcomed the introduction of the Business Energy Support Scheme, stating that the survival of many pubs is conditional on the successful and timely implementation of the Scheme.
“Our members are dealing with 300% increases in electricity and gas costs so it was essential Government introduced such a scheme given the genuine concern within the sector about the viability of trading during the Winter months,” said VFI Chief Executive Paul Clancy, adding, “While we welcome the Scheme’s announcement, our members will be anxious to learn the full details about how they can access the Scheme so we’re urging Government to publish registration requirements immediately. Publicans and small businesses need clarity and certainty today.
“We also note the Scheme is only guaranteed ‘over the Winter months’ according to the Finance Minister,” he continued, “Most experts agree the energy crisis will continue for at least two years so we welcome the fact Government has committed to reviewing the need for support measures in the new year. If energy costs continue to increase, supports will have to be extended.”
While the Scheme will bring some relief to publicans the overall prospects for the trade remain depressed as costs continue to increase while consumers’ disposable income shrinks.
However, the VFI said that the decision not to extend the special hospitality VAT rate of 9% past February 2023 will be “a devastating blow” to publicans serving food and will have massive consequences for the trade throughout next year.
In a period of soaring inflation, businesses will be forced to increase prices at a time when their customers are in the middle of a cost-of-living crisis.
The VFI was also disappointed that the Government turned down the opportunity to reduce the alcohol excise tax rate, stating it to have been a missed opportunity for the tourism sector and for small pubs where a lower excise rate would help pubs survive the coming Winter.
“We have the second-highest excise rate in Europe which places our tourism sector at an extreme disadvantage when competing for inbound tourists,” explained Paul Clancy, “As business costs increase and consumers’ disposable income decreases we’re going to see extraordinary pressure on pubs who’re caught in a trap they’re powerless to escape from,” he said, adding that the increase in the hospitality VAT rate “is extremely disappointing for our members who serve food. At a time when inflation is running rampant and the cost of doing business is going through the roof our members will have to increase prices for customers who’re already shell-shocked from the effects of the cost of living crisis. There is a genuine fear in the trade that when VAT reverts to 13.5% next March many customers won’t be able to afford the price increases.”
The LVA was also disappointed by the Government’s decision to not extend the 9% VAT rate for the hospitality sector beyond the end of February 2023.
“While VAT 9 doesn’t apply to alcohol, it has been very important for pubs who serve food – which is a substantial and growing portion of the business,” said Donall O’Keeffe, “So any curtailing of VAT 9 is very disappointing in that context. It will act as a significant inflationary measure at a time when we’re already grappling with escalating costs on multiple fronts. With prices already rising, VAT 9 will continue to deliver greater Exchequer returns anyway. If there is no extension of VAT 9, the real impact of increasing the level of VAT by 50% will be to put a dampener on hospitality demand.
“The current VAT measures continue until the end of February 2023, so we look forward to further engagement with Government and hope they will extend this rate beyond the current timeframe,” he concluded.
The Restaurants Association of Ireland has described yesterday’s Budget announcement as having “fallen short”, stating that it does not go far enough to protect small Irish hospitality employers as input costs rise significantly.
“Whilst the announcement of the Temporary Business Energy Support Scheme to support SMEs is welcome, covering 40% of the increase in electricity or gas bills up to a maximum of €10,000 per month per business, it does not go far enough,” said RAI Chief Executive Adrian Cummins, “The devil will be in the detail on this and we’re calling for Revenue to open and administer the Scheme immediately – some businesses are already struggling to pay the bills coming in through their doors.
“Input costs continue to rise, including food costs and energy consumption will only increase during winter months. The 9% VAT rate ending in February of next year will only increase costs for consumers and raises concern about Ireland’s competitiveness compared to our EU counterparts.
“Although the supports offered in today’s Budget are welcomed, there are still some long hard months ahead,” he continued, “This can only be the first step in a package of measures over the coming winter months and we look forward to meeting and collaborating with Government Departments in the coming weeks for solutions on how best to support the most vulnerable businesses and employers in Irish Hospitality”
Food Drink Ireland, the Ibec group representing the food and drink sector, has welcomed the energy supports announced in the Budget as a step in the right direction but called for larger supports over a longer time period.
“Energy supports are now central to the sustainability of many food and drink businesses as they will determine their ability to remain competitive in export markets like Great Britain where they also face the headwinds of a weakened sterling exchange rate,” said FDI Director Paul Kelly.
FDI also called for the energy supports for businesses to match those in other key EU export markets so that food and drink businesses can maintain their valuable market positions.