Shops and restaurants 'will see mass closures' without Vat relief, says retailers' group

A swathe of businesses, particularly restaurants, have recently closed their doors for the last time citing unmanageable costs as the reason. File picture: iStock

A retailers’ group has warned that mass closures will inevitably follow should the Government not intervene regarding the levels of Vat being paid by businesses.

Retail Excellence Ireland said the Government is “mistaken if it believes that hard-pressed retailers can absorb a series of rapidly mounting labour costs, punitive repayment terms, and ongoing supply chain issues — and still remain in business”.

Irish retail and catering entities are facing a perfect storm of headwinds at present, with inflationary issues, energy, and legacy tax bills combining to place unprecedented pressure on business owners.

A swathe of businesses, particularly restaurants, have recently closed their doors for the last time citing unmanageable costs as the reason.

The latest costs survey conducted by REI shows that just under 50% of its members “will not be able to accommodate” the rising costs associated with running their business as a going concern.

The survey, conducted in January with 128 companies representing 3,000 Irish stores, said that 83% of those consulted had made changes to their operating model in order to tackle the increasing cost of doing business.

Some 72% had seen an increase in employee sick days since the introduction of statutory sick leave, REI said, while 72% also felt that current economic policies will “disrupt their business” over the course of 2024.

Jean McCabe, chief executive of REI, said that the “reality” of the current situation is “that without significant financial support, specifically on Vat, we will see mass closures”.

She said:

It appears that the Government does not understand that so many of our colleagues are close to shutting their doors for good.

Vat in Ireland is currently set at 13.5%. It had been reduced to 9% for the catering sector during and after covid before returning to its previous level last September.

The scale of the cost crisis facing businesses has been acknowledged previously by the Government, which on Monday moved to set the interest rate on pandemic-era warehoused debt to 0% for businesses, with refunds due for any company that had already paid the previous rate of 3%.

However, a Vat reduction has yet to be broached by the State.

“Retailers are realistic and understand that we are navigating choppy economic waters, however, the industry is being crucified on costs without any kind of meaningful relief,” Ms McCabe said, adding that many of the costs currently being encountered are having a “domino effect” on retailers.