Drinks sector seeks excise tax cut to save rural jobs from hard Brexit

IRELAND needs to reduce its high alcohol excise tax over the next two years to help offset the impacts which a no-deal Brexit will have on rural drinks industry jobs.

Drinks sector seeks excise tax cut to save rural jobs from hard Brexit

IRELAND needs to reduce its high alcohol excise tax over the next two years to help offset the impacts which a no-deal Brexit will have on rural drinks industry jobs.

The Drinks Industry Group of Ireland (DIGI) has reminded the Government that almost 70% of Ireland’s 5,876 drinks manufacturing jobs are located outside of Dublin. A new report for DIGI, ‘National and regional employment in the drinks and hospitality sector in 2019’, authored by DCU economist Anthony Foley, highlights value of drinks and hospitality sector employment to the economy and rural jobs.

The report notes that Ireland’s tourism employment as a share of total employment is the fourth highest in the EU, after only Greece, Cyprus and Malta. Between Q1 2012 and Q1 2019, drinks and hospitality jobs accounted for more than 12% of Ireland’s total employment increase, with most jobs in beverage and food serving.

Rosemary Garth, chair of DIGI and director of Communications and Corporate Affairs at Irish Distillers, said: “Despite the drinks and hospitality sector’s obvious contributions to national and regional employment, Ireland’s innovative economy, and to local communities, the Government is not doing enough to incentivise this industry and does not seem to view the sector with enough appreciation or understanding. This attitude will prove disastrous if the UK leaves the EU without a deal in October.

“A no-deal Brexit will have immediate consequences for Ireland’s drinks and hospitality businesses. If the sterling devalues further, then it will be harder and more expensive for Ireland’s drinks businesses to export their products to the UK, which is a major market. Border controls will further delay road freight trade with mainland Europe.”

DIGI is calling on the Government to reduce alcohol excise tax by 15% over next two years to support job creation and business investment. A survey of DIGI members found that 71% of publicans say that Ireland’s excise rate has “negatively impacted their business in the last 12 months”.

In France, one cent of excise tax is levied on a 187ml glass of wine compared to 80c in Ireland, while there is 5c on a pint of lager in Germany, but 55 cent on a pint here. Excise tax on a 70cl bottle of whiskey purchased in an Irish off-licence is almost €12, compared to €2.90 in Italy.

While it’s hard to predict the impact on drinks and hospitality jobs, the two linked industries certainly play a critical role in rural economies. In total, 175,000, or 7.6% of all Irish workers, are employed in drinks and hospitality jobs in Ireland, while the industry accounts for 9% of all jobs in the Border region and over 10% of all jobs in County Kerry.

Rosemary Garth added: “For drinks and hospitality businesses in rural Ireland, particularly the seasonal kind, reduced spend by British tourists will have a lasting, damaging effect on their ability to take on new workers or keep on existing staff. In extreme cases, a no-deal Brexit may lead to a recession-type downturn and force some businesses to close up shop.

“By reducing Ireland’s disproportionately high alcohol excise tax over the next two years, the Government will be giving drinks and hospitality businesses a lifeline. Rural businesses will be better positioned to weather the worst of a no-deal Brexit, to be more competitive and improve trading.”

The DIGI report drills down to show the extent to which rural economies are vulnerable to a potential double hit to drinks and hospitality jobs on foot of a no-deal Brexit. In six of the seven non-Dublin regions, recent growth in hospitality employment has exceeded growth in total regional employment.

Some 90,000 people are directly or indirectly employed by the core drinks industry, which includes pubs, breweries, distilleries, restaurants, and other associated businesses.

According to recent industry analysis by DIGI, 71 rural pubs closed in 2018. In the period between 2005 and 2018, some 1,535 or nearly 20% of rural pubs closed; many were forced to shut up shop during the recession.

In response to DIGI’s survey, More than a third (37%) of off-licences told surveyors that they will close in the next 10 years, and 10% of rural publicans said they will let staff go in 2019 due to “rising business costs”.

Mr Tony Foley, Emeritus Associate Professor of Economics, DCU, said: “Some people think of hospitality sector jobs and think of them as low-paid, relative to jobs with multinational companies. But, of course, these jobs have an important role in society that should not be overlooked.

Tony Foley, DCU economist, author of report for DIGI.
Tony Foley, DCU economist, author of report for DIGI.

“Not everyone has a Masters in Science, and not everyone is working in the same locations as the multinational companies. The hospitality sector provides invaluable rural employment, which plays a key role in retaining population levels in rural areas.”

Mr Foley cites CSO figures which show that the 175,000 people working within drinks and hospitality rises to 260,000 jobs when you add in airlines and coaches etc. The social impacts are as hard to predict as Brexit outcomes.

“We do not have a realistic estimate of the hit our GDP will take as a result of a no-deal Brexit,” said Mr Foley. “We’re hoping it will be a managed exit, even without a deal, but we just don’t know.

“What we do know is that the threat to the employment situation is serious. We also know, from our research over time, that there continues to be a problem with creating regional employment.”

And, even without Brexit, we know that hospitality sector jobs are already under pressure. According to a recent survey of 1,000 Irish consumers, conducted by Amárach Research on behalf of DIGI, 43% of consumers who have noticed an increase in prices as a result of the 2018 Vat hike say they have reduced their spending at restaurants, hotels and cafés.

A quarter say they no longer purchase alcohol with their meals. Some 51% said they bring international visitors to their local pub and 64% bring guests to their local restaurant.

DIGI is hosting an event titled ‘Rural Development and the Drinks and Hospitality Industry’ in Connacht Distillery, Ballina, Co Mayo, this Friday. In the second in a three-part series of regional events, economist and author David McWilliams will address a group of local and national industry members on the importance and role of this sector in Ireland, while broadcaster Ivan Yates will chair an industry-led panel discussion on the issues raised.

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