Reacting to the detail of the package announced yesterday evening, the trio welcomed the provisions made but, in the context of the current situation (where a two-tier sector exists in the drinks industry with some pubs open and others still closed indefinitely), they said that the measures “will not deliver”.
However the group did welcome the extension of the Temporary Wage Subsidy Scheme which will provide additional certainty to businesses and to employees while acknowledging that the proposed Stay and Spend scheme would deliver for hotels.
With VAT reduced to 21% from 23% LVA Chief Executive Donall O’Keeffe stated that the reduction in VAT is a start “… but we need to consider the reality of the new business model within which pubs are operating – Government guidelines and Covid measures limit the capacity of pubs to trade which means demand is reduced, capacity is significantly decreased and consumers’ ability to spend in pubs is capped.
“Government support needs to be cognisant of this reality and we remain open and willing to engage with government in meaningful consultation in the period ahead to fully consider this employment-intensive, domestic sector.”
The group had originally sought a reduction in the VAT rate to 9% for on-trade alcohol to support Ireland’s 7,000 pubs and maintain the 50,000 jobs in the sector. The measure was intended to boost the viability of the businesses rather than stimulate demand.
“Ireland’s publicans are businesspeople, employing over 50,000 people in every corner of Ireland, the real economy,” commented VFI Chief Executive Padraig Cribben, “While the measures announced are welcome, they’re only a start. The temporary reduction in the VAT rate on on-trade alcohol will assist in the short term but it will end. We need to consider the pubs that are closed, we need to get them open and provide support to get people back to work in businesses that are supported to be sustainable in the long term”.
While any and all supports are welcome, there is a need to continue to assess and review their impact, believes Drinks Ireland Director Patricia Callan.
“The environment in which the drinks and hospitality industry is operating is abnormal and this is set to continue,” she stated, “We must look to the Covid measures implemented in the EU and consider their impact while also reviewing the progress of our own measures announced today. This is important ahead of the National Economic Plan in October and in protecting the longer-term viability of Irish pubs as they continue to alter their business model to operate within the confines and realities of Covid in the long term.”
21% VAT rate – a “nail in coffin” for border hospitality
However, by not decreasing the Tourism and Hospitality VAT rate in line with our EU counterparts and closest neighbour, the July Stimulus “has put a nail in the coffin for border Restaurant & Hospitality businesses competing with 5% rate in Northern Ireland” said the Restaurant Association of Ireland’s Chief Executive Adrian Cummins who questioned the decision not to include a grants package for Tourism and Hospitality the Stimulus package.
He described the package as “cold comfort to thousands of restaurant and hospitality businesses across the country”.
While the Association is glad to see the extension of the Temporary Wage Subsidy Scheme, the inclusion of seasonal businesses, as well as the extension of the Commercial Rates Waiver and expanded Restart Grant “after months of tireless lobbying”, it believes that to ignore immediate legislative issues such as insurance reform and commercial leases until October’s Budget would result in the demise of a significant number of businesses and immediate job losses.
Although welcoming the extension of the TWSS scheme, Adrian Cummins believes that the absence of “tangible business supports shows lack of imagination, understanding and disconnect from small businesses in Ireland.
“I am appealing to the Government to rethink this decision and to support independent tourism and hospitality businesses around the country with a targeted grants package,” he stated.
The Association has also expressed its concern that the lack of legislative issues addressed in the package, such as insurance reform and commercial leases, could prove detrimental to the industry too.
There are concerns that without further supports implemented many local businesses will close permanently.
“If the government fails to act, this lack of support for Irish restaurants could cost the state €2.8 billion over the next 24-month post-Covid-19 period, according to Economist Jim Power’s Restaurant Recovery Plan report presented to all Government Departments and TD’s in June,” he warned.
The report states that there are 100,000 jobs at risk in the sector and that, “Without aggressive and effective official policy supports, many of these businesses will be forced into bankruptcy”.
Jim Power warned the Government as early as last April that the costs of not supporting the Restaurant sector would be significant.
If 100,000 workers were to remain unemployed for a full year it would cost the Exchequer around €2 billion in increased social protection expenditure, €500 million in lost payroll taxes and €240 million in lost VAT receipts.
It would also cost local authorities around €52 million in lost commercial rates.
“By not supporting businesses in the July Stimulus today Government has passed on significant costs to the Exchequer that could have been avoided,’ believes the RAI.
Follow the Protect our Pubs campaign at #NewGovProtectourPubs.