A restaurant closing in Ireland can cost the Exchequer up to €1.36 million and on average involves the loss of 22 direct jobs, a new report commissioned by the Restaurants Association of Ireland to be published on Tuesday suggests.
The association estimates two restaurants or other food-led businesses are closing each day with about 70 shutting in February and said that so far this year 212 restaurants, cafes and other food businesses have shut. It estimates the economic cost to these closures at €288 million annually.
The RAI says that so far in 2024, a total of 212 restaurants, cafes and other food-led businesses have closed down, with a cumulative annual cost to the economy of up to €288m.
The total cost of various tax revenues lost as well as social protection payments required over a year, the organisation suggests, is greater than would be involved in cutting the VAT rate in hospitality to 9 per cent, something it continues to see as key to securing jobs in the sector.
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In its report, The Economic Impact of Restaurant Closures, compiled by Jim Power, the RAI says employment in the sector overall grew by more than 80 per cent between the first quarter of 2012 and the end of last year but its chief executive, Adrian Cummins, contests some of the figures cited by union officials in recent weeks regarding more recent growth, pointing to the number of hotels taken out of general use over the past couple of years among other factors.
He also rejects the suggestion that when a restaurant or coffee shop closes it is simply replaced by a similar business employing the broadly the same number of people and so contributing the same to the economy.
“That’s probably true of a restaurant closing in south Dublin or Dublin city centre but there are a lot of parts of the country where when a restaurant closes, there are people facing the prospect of having to try to get work in the next town. In many cases there aren’t alternative jobs readily available.”
It is beyond dispute, he says, that the sector has been hit exceptionally hard by cost increases over the past couple of years with food, energy and wage costs all increasing just as many members of the public were struggling themselves due to the increased cost of living.
As some of costs receded, he says, new legislative measures, including an increased minimum wage and additional leave entitlements have started to come on stream with others, including pension auto-enrolment, due to commence next year.
[ Almost 1,600 restaurant job losses put down to Government measuresOpens in new window ]
A Government-backed assessment of these measures recently put the increase in costs to businesses such as restaurants at a cumulative 19 per cent by 2026.
Mr Cummins suggests that given those figures, some form of mitigation by Government is essential if many more businesses are not to be lost.
Irish Congress of Trade Unions general secretary Owen Reidy said last week he agreed supports should be provided to individual businesses that were struggling but he specifically opposed the restoration of the 9 per cent VAT rate on the basis that it was a blanket measure which would also benefit highly profitable businesses, some of them chains or part of multinationals.
Responding, Mr Cummins said he supported targeting measures but that an RAI analysis of costs in the sector suggests that of an average €100,000 in increased costs this year on a business with a turnover of €1 million, €37,000 relates to VAT and €38,000 to wage inflation while just €5,000 relates to PRSI.
“So in the general scheme of things, I think the Government is over-inflating the benefits of a PRSI reduction for our industry when addressing the VAT is the only show in town when it comes to helping us into the future.”
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