Hospitality closures down 26% this year ahead of this week's Vat cut

But PwC warns that businesses are still struggling to cope with the cost of energy, transport, and wages 

The Vat rate for food-service businesses and salons will revert to 9% on Wednesday, July 1. Stock picture
 

Hospitality insolvencies during the first half of the year have declined by more than 26%, compared to the same period in 2025, ahead of the Vat rate cut for food-service businesses that is due to come into effect next month, new figures from consultancy firm PwC shows.

Overall insolvencies levels so far this year remain on par with last year with some notable exceptions such as retail which has seen insolvencies increase by 35% — accounting for nearly one in four insolvencies in the period.

There were 232 corporate insolvencies recorded during the second quarter of the year bringing the total during the first half of the year to 444, broadly in line with the 436 insolvencies recorded in the same period of 2025.

PwC also pointed out that the number of insolvencies is running below the long-term average of around 250 per quarter.

PwC said the annual insolvency rate remains at approximately 27 per 10,000 businesses, equating to nearly 900 insolvencies per annum.

Dublin continues to account for the largest share of insolvencies, with 219 of the 444 recorded, while Cork accounted for 47 and Galway recorded 36.

The retail sector saw 109 insolvencies during the first half of the year — up from 81 last year.

60 hospitality insolvencies in Q1 and Q2

The hospitality sector, however, recorded 60 insolvencies during Q1 and Q2 — down from 81 last year.

“The decline may reflect some stabilisation within the sector, after operators faced significant headwinds such as cost inflation, energy price increases and post-pandemic demand shifts,” PwC said.

Despite the positive trend, hospitality closures do continue: Earlier this month, the owners of Restaurant 14A in Cork City announced that it will close. Picture: 14A/Instagram

This decline comes ahead of the reintroduction of the reduced Vat rate of 9% for restaurants and catering services from July 1. The change is expected to cost the exchequer €232m through the rest of this year and €681m over of a full year.

In addition, there were 56 insolvencies in the professional, scientific, and technical activities sector during the first half of the year, 53 in construction, and 44 in the manufacturing sector.

PwC Ireland business recovery partner Ken Tyrrell said the data shows “a remarkable steady level of insolvencies over the last three years indicating sustained resilience by Irish businesses”.

Cost of energy, transport, and wages 

“However, there are areas of concern: Businesses continue to face elevated input costs across energy, transport, and wages, with renewed increases in global energy prices feeding through to operating expenses.

“Inflation, while moderating from peak levels, is still putting pressure on both margins and consumer spending, limiting the ability of firms to pass on higher costs. As a result, many businesses, particularly SMEs, are seeing ongoing pressure on margins, leaving them more vulnerable to cashflow challenges.”

The data also shows the number of receivership appointments has declined significantly between January and June with 32 recorded — down from 56 last year.

PwC said this recent trend of lower levels of enforcement may reflect an increase in lender patience and possible consideration being given to the economic challenges facing companies.

Scarp process underutilised

There were 11 examinerships recorded and 16 Small Company Administrative Rescue Process (Scarps) recorded. This compares to 17 examinerships and 15 Scarps last year.

The company said that the Scarp rescue process remains underutilised. It aims to facilitate simplified out-of-court debt restructuring for small businesses deemed to be viable.

As part of the scheme, a process adviser is appointed to prepare a rescue plan and to work with creditors to consolidate company debts.

There were 70 court liquidations recorded so far this year — a 23% increase compared to last year. More than a third, 24, of these cases resulted from petitions filed by the Revenue Commissioners.