Figures show hospitality closures have 'been running at two a day for much of this year'

The RAI told the Irish Examiner that the surge in closures in January saw 101 businesses shut.  This compared to just 18 in January of 2023. 

More than 570 restaurants, cafes, and other food businesses have permanently shut their doors since last September, new figures have revealed.

The Restaurant's Association of Ireland (RAI) has published new data that reveal the extent of closures across the sector amid rising business costs and an increase in the VAT rate. The association says there has been a notable spike in closures since VAT rates returned to 13.5% last year, having been set at 9% throughout the pandemic. 

"Since last September, food-led hospitality businesses have been faced with a decision to either erode their competitiveness or take a 4.5% hit to the bottom line, at a time when energy and food costs have already exploded," the RAI said.

A total of 45 restaurants, cafés, and other food-led businesses ceased trading last month, the RAI said, bringing the cumulative number of closures to 577 since the VAT rate increased. "A large number — though not all — of these closures would have been prevented if the lower VAT rate remained in place," said Adrian Cummins, chief executive of the RAI.

Mr Cummins said the number of restaurant closures has now reached such a level that it is costing the State more money than the reduced VAT rate due to its unintended consequences, which, it says, the government "fails to acknowledge".

“While the pace of closures has slowed slightly during the summer compared to the tsunami we witnessed at the beginning of the year, this was expected," Mr Cummins said.

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“But the reality is that these businesses are still in crisis. Without a return to the lower VAT rate, we are guaranteed to see another wave of closures as we leave the summer and move into the sector’s quieter months."

The first half of this year saw several high-profile closures in Cork in particular, with many citing the high costs of doing business as the key reason for shutting down.

In January, well-known restaurant Nash 19 ceased trading due to "out of control" business costs, while long-standing Cork City staple, Tung Sing, announced its closure after 60 years in business, citing "constantly increasing cost and operating expenses".

The RAI told the Irish Examiner that the surge in closures in January saw 101 businesses shut.  This compared to just 18 in January of 2023. 

Mr Cummins said that in the worst days of the crash, there was a trend of one closure a day. "We've been running at two a day for much of this year," he said. The RAI tracks the closures using company liquidation data along with media notices and its own membership data.

VAT rate

In recent months, Fine Gael has started to lobby for reducing VAT again, with Enterprise Minister Peter Burke signalling his intention to fight for the return of the 9% rate. However, Fianna Fáil ministers, including Finance Minister Jack Chambers, are reluctant to consider the proposal.

Despite Fine Gael's recent support for the lower rate, Minister for Public Expenditure Paschal Donohoe said he made it clear when the VAT rate was initially reduced to 9% that the move would be temporary.

Speaking on the latest closure figures on Thursday, Mr Donohoe said: "When we made the reduction to the VAT rate to 9%, that was as part of the measures we brought in support the hospitality sector during the covid pandemic."

He added that he “always made it clear” that when the impact of the pandemic declined, the rate would go back up. “I always regret when I see any small business within our country close. But it was made very, very clear at the time that it was a temporary measure," he said.

Mr Cummins said the government's upcoming Budget will be assessed by the sector solely on the decision on VAT.