Pat Crotty: Critical time for pubs as costs of staying open surge

I understand that customers hear about suppliers increasing the cost of a pint by 6 cent but are left scratching their heads when that translates to, for instance, 20 cent at the till

Sun, 05 May, 2024 - 16:18

Pat Crotty

As the chief executive of the Vintners Federation of Ireland, I represent a sector that is both a cornerstone of the Irish economy and a vital part of our national identity. Irish pubs are more than just places to enjoy a drink, they are the social fabric of our communities, a tourist attraction and a living tradition.

However, as we navigate through the ever-changing economic landscape, the costs of doing business are escalating, placing our pubs at significant risk. These cost increases are usually just market forces at work but, since last September when the hospitality Vat rate increased to 13.5%, Government interventions have become the single biggest pressure on business viability.

It is urgent that we address these challenges head-on, with a concerted effort from both industry leaders and Government.

The hospitality sector, especially our pubs, has always demonstrated remarkable resilience and adaptability, surviving financial and covid crises, labour shortages, and the product and energy cost spikes of the last two years. Yet, the recent surge in labour costs threatens to overwhelm even the most robust establishments.

These financial pressures are not just numbers on a balance sheet; they translate directly into the viability of family pubs across the country, impacting owners, staff, patrons, and the broader community.

The increase in labour costs is the most pressing issue. A recent Government report found that smaller hospitality outlets will see their wage costs increase by 14.5% in 2024, and by a potential 36.7% by 2026. This is unsustainable: It will kill family businesses.

I understand that customers hear about suppliers increasing the cost of a pint by 6 cent but are left scratching their heads when that translates to, for instance, 20 cent at the till.

The simple reason is that the 6 cent is only one element of costs. Publicans must provide for staff wage increases, enhanced statutory sick pay entitlements, along with every other cost increase that has been absorbed for the last year and others that are coming down the track. Then add Vat and hope for a small margin of profit. There is a whole host of costs that must be covered to get there.

Remember, profit is what allows a publican to support local sports clubs and charities in their communities, so it shouldn’t be viewed negatively. Without profit, however small, there would be no hospitality sector in Ireland.

The Government supported various sectors throughout the pandemic, for which we are grateful. Publicans are not looking for handouts; they are seeking a partnership that recognises the unique role they play in the economy and society.

While the recent Increased Cost of Doing Business grant was welcome, it was a scatter-gun approach that was difficult for many small businesses to access, and was far short of the type of supports required.

The sector needs a support mechanism that targets specific issues like labour costs and the high taxes imposed on publicans.

Specifically, we call on the Government to consider the following measures.

Ireland’s excise duty is the second highest in Europe. We simply can’t compete with the likes of Spain and Portugal where taxes are virtually nil. Lowering the excise rate with help all pubs become more competitive, secure jobs and boost tourism!

Reducing the hospitality Vat rate back to 9% from 13.5% would hugely benefit pubs serving food. Such an adjustments targeting the hospitality sector will alleviate financial pressures and stimulate growth. However, this measure won’t support traditional pubs not serving food.

Reducing the PRSI burden would have a number of benefits such as boosting growth potential by freeing up resources that could be reinvested in the business. It would also encourage more employment of young people who benefit from fantastic training and acquire life-long skills.

The public house has always been more than just a business, it is a community gathering place, a venue for live music and events, and a hub for tourism. The challenges we face today threaten this essential role. We have seen too many pubs close their doors for good, not because they failed to connect with their community or manage their business wisely, but simply because the financial hurdles have become insurmountable.

This is a critical moment for our industry. Let us work together to ensure that the Irish pub, a symbol of our national spirit and camaraderie, continues to thrive for generations to come.