Tone-deaf budget failed to deliver for restaurants, cafés and the entire hospitality industry

[Tuesday – October 1st, 2024] – The Restaurants Association of Ireland (RAI) has strongly criticised the Government’s refusal to reinstate the 9% VAT rate in Budget 2025, calling the decision a “devastating blow” to a sector already in crisis.

Since the VAT rate was increased to 13.5% in September 2023, a total of 612 restaurants, cafés, gastropubs and other food-led businesses have been forced to close permanently. Arriving on top of significant increases in the minimum wage, paid statutory sick days, the upcoming pension auto-enrolment scheme and sky-high energy and food costs, the VAT increase proved the final nail in the coffin for many.

Today’s decision will push over 1,000 more businesses into closure over the next 12 months, according to the RAI. This is based on trends featured in closure figures collected by the association in recent months.

An April 2024 survey of 212 members of the RAI revealed that 74% of respondents would be forced to strongly consider closing their doors for good if the 9% VAT rate was not restored.

In meetings with Government Ministers in recent months, the Restaurants Association of Ireland, its members and the entire hospitality industry consistently delivered two key messages: the 9% VAT rate had to be reinstated and businesses were opposed to any more short-term grants being introduced as they have proven totally ineffective in the past.

For months, the Government repeatedly promised it would listen to the concerns of the hospitality industry – which its own report found will be most impacted by its proposed labour policies in years to come – but has failed utterly on both of these issues.

The €4,000 grant – amounting to just €77 a week – to be provided to hospitality businesses is insignificant, insulting and will not make a dent in the out-of-control cost base facing SMEs that this Government has presided over in the past two years. 

For example, it will only cover the annual increase for 2.4 full-time employees on minimum wage. It will also not scratch the surface when it comes to the extra costs that the Government’s pension auto-enrolment scheme – set to be introduced in September 2025 – will impose on SMEs. 

With a general election fast approaching, the RAI has warned that the Government’s failure to support the hospitality sector will not be quickly forgotten by the 270,000 people employed in the industry. This decision will resonate deeply in local communities across Ireland, especially in rural areas where the closure of food-led businesses leaves a profound social and economic void.

While talking a big game, particularly in recent months, around supporting SMEs – which make up 99.8% of active enterprises and employ 60% of the workforce outside the public sector – the Government refused to introduce policies to match their rhetoric and instead took the advice of department officials who know the price of everything and the value of nothing. 

CEO of the Restaurants Association, Adrian Cummins, said:

“This was the most important Budget for the hospitality sector since I first became CEO of the Restaurants Association in 2009. 

“A pressurised domestic consumer, lagging tourist numbers and, above all, an out-of-control cost base mean optimism among my members has never been lower.

“The Government has offered no hope to these businesses for the future. It ignored their plea for a pro-SME approach and a viable trading environment through the reinstatement of the correct VAT rate.

“The €4,000 piecemeal grant constructed by the Government at the 11th hour as an alternative to meaningful action will be totally inadequate to keep over 1,000 doors of restaurants, cafés and other food-led businesses open over the next year.

“We fully expect this new grant to be as ineffective as the failed Temporary Business Energy Support Scheme (TBESS) and Increased Cost of Business (ICOB) scheme. Even if it reaches those businesses in need, it will be too little, too late.”

President of the Restaurants Association of Ireland and the owner of Hartes of Kildare, Paul Lenehan, said:

“The Government has turned its back on our industry today – which employs 270,000 nationwide – and this will not be quickly forgotten, particularly with a general election on the horizon. 

“Countless towns and villages will soon lose their local restaurant, their local pub, their local café where they meet, work, mourn and celebrate life’s milestones.

“My heart goes out to all of those restaurant, café and pub owners who tuned into Budget 2025 today looking for a lifeline, looking for the Government – awash with cash itself – to support them. These businesses were abandoned today, despite the vital role they play in local communities.

“As a result of a multitude of Government policies that have significantly and disproportionately increased the cost of doing business for restaurants, cafés, pubs and other SMEs in the hospitality sector, the future of our beloved industry has never been in so much jeopardy.

“It was truly inspiring to see the entire tourism and hospitality sector unite in recent months in a bid to save our industry. So many worked so hard in preparation for today. Unfortunately, the Government decided not to listen, the consequences of which will be devastating and long-lasting.”

ENDS —

Notes to the editor

• With 3,000 members, the Restaurants Association of Ireland is the representative body for restaurants, cafés, gastropubs and other food-led businesses in Ireland.
• A copy of the RAI’s pre-Budget submission can be found here: https://www.rai.ie/wp-content/uploads/2024/07/RAI-Pre-Budget-Submission-2025.pdf.
• For further information about the RAI, visit https://www.rai.ie/.

For all media inquiries, please contact: