The Restaurants Association of Ireland (RAI) has determined that nearly 600 eateries have shuttered following a 50 per cent VAT increase implemented by the government in September of the preceding year. In 2023, the special 9 per cent VAT rate for businesses in the hospitality sector was eliminated, escalating to 13.5 per cent. The RAI records reveal that since the VAT hike in September 2023, 577 restaurants have ceased operations. This data is compiled through the use of companies’ register details and press remarks. The closing ratio is regarded by the association as exceeding the typical business attrition rate.
Looking back to January 2023, only 18 restaurants closed, a stark contrast to the 101 closures in the same month the following year, signifying a surge in restraint from consumers after the festive period. Established names such as Cork-based Nash 19 and Tung Sing Chinese restaurant were among the notable closures. More recently, Myrtle in Ardee, Co Louth and Michael’s on Merrion Row in Dublin have also ceased operations.
In June, a Deloitte study indicated that insolvencies within the hospitality sector had spiked by 88 per cent to 77 in the first six months of this year, compared to the corresponding period in 2023. This surge in restaurant closures is attributed to the increased VAT rate, alongside rising insurance and energy costs and higher labour charges. However, this data only accounts for limited liability companies, with sole proprietorships excluded. The government, nevertheless, insists that the low insolvency rates until last year were primarily due to Covid-19 support and other interventions.
The RAI data also reveals that 245 — roughly 40 per cent of the total — restaurants closed between December 2023 and the first two months of the year. The association cites an economic analysis by Jim Power, stating every closure leaves a €1.36 million dent in the economy. It argues that the increased VAT rate is costing the State more than the €545 million that the Department of Finance estimates a reduction of the tax to 9 per cent would imply for the treasury. RAI’s CEO, Adrian Cummins, has expressed that numerous dining businesses are barely managing, hoping for a robust summer to stay afloat. He cautions that without reverting to the lower VAT rate, a new wave of closures is inevitable as the usually slow period for the hospitality sector approaches post-summer.