Over 200 restaurants have closed this year costing the economy €288m
On average 22 direct employees lost their jobs as a result of each of restaurant closure along with approximately 13 indirect jobs.
Restaurant closures so far this year have cost the Irish economy €288m between lost wages and taxes with more expected as representative organisations once again call for a Vat cut for the sector.
According to a new report, authored by economist Jim Power on behalf of the Restaurants Association of Ireland (RAI), 212 restaurants, cafés, and other food-led businesses have shut their doors for good in 2024.
It found on average 22 direct employees lost their jobs as a result of each of these closures and approximately 13 indirect jobs.
It estimates that the closure of these restaurants could cost the State up to €1.36m in total economic impact in one full year with €576,554 in lost wages and €115,310 in payroll taxes. There is also an average loss of €105,000 in Vat and nearly €12,000 in €11,874 commercial rate receipts paid to the local authority.
“If the workers laid off had to go on social welfare payments, the annual cost would work out at around €440,000,” the report said.
The report said that restaurant closures are a combination of consumers not spending as much due to the increasing cost of living, increased costs including food and energy, as well as higher wage costs and interest rates.
In addition, it said that Government measures such minimum wage hikes, an increase in employer PRSI contributions, and statutory sick pay increase to five days, are all adding to costs and are set to “intensify over the next couple of years”.
The pension auto-enrolment system is also due to be rolled out later this year.
“These businesses were already under significant pressure due to higher energy costs, higher food prices, labour shortages, the increase in the Vat rate and other input costs,” the report said.
The report said, based on a survey of wage costs in the restaurant sector, the various State measures are estimated to add €229m to wage costs in the restaurant sector in 2024, and €675m by 2026.
These added wage pressures come as the restaurants see higher costs in other areas — including food and electricity — compared to what they were only a few years ago.
According to the report, between February 2021 and February 2024, average food prices increased by 20.8% while the cost of electricity remained 77.3% higher than September 2020.
Along with other industry bodies in the tourism sector, the RAI have once again called for the Government to reintroduce the special 9% Vat rate for the tourism and hospitality sectors which was removed in September last year when it reverted back to 13.5%.
Mr Power said, from his analysis, it is clear that the 9% Vat rate should be reintroduced because the Government can’t afford not to.
“If the Government waits until October’s Budget to take meaningful action to save Ireland’s local, independent restaurants and cafés — as it appears it currently plans on doing — it will result in substantial losses for the State, while communities will be deprived of cherished social outlets,” he said.
Chief executive of the RAI Adrian Cummins said the report shows the “stark economic reality” of how “damaging food-led hospitality closures are to the State and the economy”.
“The Government must reduce the Vat rate to 9% to make the food-led hospitality industry viable again and protect local businesses and local jobs,” he said.
The RAI represents approximately 3,000 members across the country. Data from the Central Statistics Office show that as of the end of last year, there were approximately 132,000 people employed by the sector.
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