Restaurant sector 'at lowest ebb'

With an average of two restaurants closing their doors every day this year so far in Ireland, two local restaurateurs have strongly backed a call for the 9% VAT rate to be reinstated for the food element of the hospitality sector in the upcoming budget.

The proprietor of the award-winning Thyme restaurant in Athlone's Custume Place, John Coffey, says he has never seen the industry “at such a low ebb” while the owner of The Fatted Calf, Feargal O'Donnell said his utility costs have “doubled, and even trebled” over the past year.

The decision of chef, Dylan McGrath, to close two of his three Dublin restaurants last week “speaks volumes of the crisis affecting the restaurant sector” according to O'Donnell, who says he had to scale back the opening of his restaurant from six days to five in order to “try to make savings.”

Feargal and his wife, Fiona, both work full-time in The Fatted Calf, which opened in 2010, and while he acknowledges that a return to the 9% VAT rate would not solve “all the problems” facing the sector, it would “help hugely” towards keeping the lid on running costs.

“If you were a real hard-nosed businessman running a restaurant at the moment, you would run away, but I have been in this industry all my life, and I am facing an uphill battle just to meet the ever-rising costs that keep coming my way day after day,” he says.

Rising costs across the board are also a daily headache for John Coffey in Thyme restaurant, who says it would be “next to impossible” for any young person to open a restaurant in the current economic climate and expect to survive.

“Ireland is renowned internationally for the quality of our food offering, but I really wonder what will happen when my generation of chefs is no longer around, because I would not be encouraging my own children to go into the hospitality sector,” says John Coffey, who laments the fact that there seems to be “no real appetite” on the part of Government to provide incentives to keep restaurants open.

Although both John Coffey and Feargal O'Donnell are strongly backing calls by the Restaurants Association of Ireland (RAI) for a reinstatement of the 9% VAT rate, neither of them expect it to be announced in Budget 2025 on October 1 next. “All the signs seem to point towards it being a non-runner,” says Feargal O'Donnell, while John Coffey it would be “a strong signal” from the Government that they are serious about supporting small, independent food businesses.

“Irish food is such a valuable part of our national identity, and it is such a shame to see such a valuable part of our identity being put at risk of disappearing altogether and being turned over to the big food chains” says John Coffey “and if we allow that to happen we will never get back what we once had to offer both the local population and tourists visiting our country.”

A report commissioned by the Restaurants Association of Ireland in April, which was prepared by leading economist, Jim Power, found that agriculture output prices are now 34% above early 2020 levels and electricity prices are 77.3% higher than in September of the same year.

Coupled with that, the report found that various State-induced measures such as the increase in the national minimum wage; statutory sick pay changes; the extra bank holiday; higher PRSI; auto-enrolment for pensions and the move towards a living wage by 2026 have all significantly increased the cost of doing business for restaurateurs.

Mullingar-based Minister for Enterprise, Peter Burke, has publicity stated his support for a reinstatement of the 9% VAT rate for the food element of the hospitality sector, and the majority of the Fine Gael parliamentary party are believed to be in favour of the move. However, neither the Finance Minister, Jack Chambers, nor the Taoiseach, Simon Harris, are understood to be considering a reduction, citing the cost of the measure, which is estimated to be in the region of €500 million.

The Restaurants Association of Ireland, which represents more than 3,000 members, has estimated that the average restaurant faces €100,000 in extra costs this year compared to last, and is adamant that a VAT reduction is the only way in which long-term viability can be restored to the ailing sector.

In lobby group has pulled no punches in its latest hard-hitting campaign to have the 9%$ VAT rate reinstated, and has claimed that “almost three-quarters” of its members will be forced to shut their doors if action is not taken in the upcoming budget.

Neither Feargal O'Donnell nor John Coffey are contemplating closure, but both admit that it is becoming “increasingly difficult” to meet the ever-rising costs facing their food businesses. “There is only so much you can pass onto the customer, and the last thing we would want to do is cut back on staff or the quality of our produce,” says John Coffey, “but the choices we have to make every day are stark.”