CBA meet with ministers ahead of Budget 2023

CBA meet with ministers ahead of Budget 2023

CBA meets with Minister Michael McGrath: At the meeting were: Dave O’Brien, Quintas; Minister McGrath, CBA President Kevin Herlihy, Herlihy’s Centra; CBA Manager Helen Murphy, and Seán McCarthy, Soho Group.

CORK Business Association president Kevin Herlihy from Herlihy’s Centra and members of his executive recently met with Minister Simon Coveney, and separately with Minister Michael McGrath to outline concerns facing businesses in the city and environs ahead of Budget 2023.

The substantial rise in energy prices was top of the agenda. Energy is the second highest cost for most members, so an increase will mean financial losses for many businesses and will lead to closures.

Aaron Mansworth from Trigon Hotels, chair of the CBA tourism committee and representing the IHF Cork branch, outlined that while energy consumption has been reduced by more than a third for some hotels due to ongoing sustainability projects, many still expect to see a 200-300% increase in bills by year-end.

The CBA called for the introduction of a scheme to support SMEs, protect employment and the food chain, and maintain essential retail. This scheme should be open to viable but vulnerable businesses that meet clear criteria.

The proposed reinstatement of the 13.5% VAT rate (from the current temporary rate of 9%) for the tourism sector was also outlined as a major concern for all. The CBA recommended keeping the current rate as otherwise many smaller cafes and restaurants will really struggle. It was highlighted that a significant portion of these small tourism businesses could potentially face becoming insolvent leading perhaps to businesses going under.

Businesses are facing unprecedented costs on top of these with the recently announced 80c increase in the minimum wage, rising interest rates, changes to sick pay, and the additional bank holiday.

While CBA fully supports the living wage initiative, they asked the government to step back and look at the effect all these cumulative new costs will have on the small businesses dotted all over the City and County.

The CBA’s financial expert Dave O’Brien from Quintas advised that the proposed recommendation from the Tax Strategy Group of increasing employers’ PRSI contributions to 12.55% and self-employed PRSI rates from 4% to 11.05% will adversely affect small businesses. While these increases are not proposed to come into effect immediately, they will along with the other additional costs already mentioned mean that entrepreneurs will think twice about setting up new businesses.

This will have a negative effect on the atmosphere of the city but also on employment levels. The group asked the ministers to look at debt warehousing, which is another serious concern. If the repayment proposals are not revised, it could mean that almost 50% of warehoused debt will need to be paid back in the first year (25% upfront and 33% of the remainder within the first 12 months).

Businesses need certainty on this and the majority cannot afford the upfront payments. Some clear communication on this from Revenue and the government would be extremely beneficial. Other major issues facing members are safety and security. The CBA called for increased investment in Garda resources for uniformed street patrols and visibility in the city centre.

It was highlighted that some members are now having to hire private security services to effectively ensure the ongoing safety of their staff and premises.

At the meeting, Ian Allen, managing director, Musgrave Retail Partners Ireland, called for the food retail sector to be included in “Green” or sustainable supports. Food retailing is a high energy user and so should be considered as an intensive energy sector.

The CBA outlined the recruitment crisis across sectors. Many businesses are spending considerable amounts of money to provide subsidised staff accommodation, others are renting or even buying houses or accommodating employees in hotels so they can recruit and importantly retain staff.

It was discussed that the Government will need to be careful with increasing job seekers payments. It is important to have a generous safety net for 3-6 months if someone loses their job, but people should be encouraged to get back into a buoyant jobs market.

In some businesses, 50% more staff are required because of a lack of training and experience.

Childcare was also outlined as a big issue, where support could be provided to enable new workers to enter the labour market.

Seán McCarthy representing the VFI highlighted that vintners are facing a very difficult trading environment and pub trade is still on average 20% below 2019 levels. In Cork alone, 367 bars have closed since 2006 and others may be forced to close in the face of an unsustainable cost base.

Profits have been wiped out with the increase in energy costs. Without businesses earning profits there is no incentive for owners to open their doors, which will lead to job losses. There was a call for the government to vary the hours of the day vs. night rate electricity prices. Currently, day rate prices apply between 7am-11pm, while night rate prices apply from 11pm-7am. If the day rate was to begin at 4pm, then the increased cost of energy would be greatly reduced. Such a proposal would be easily implemented across all sectors.

The Events Centre was also discussed. The CBA were advised that Cork City Council is pressing ahead with building the necessary bridges, while Live Nation and BAM are working on internal drawings. €55m is available from the state for the project. Currently, it looks like the centre will go to the site in Q1 2023.

The CBA was given a guarantee that it will happen, but it is a lot slower than anyone would like. It will take 18 months to two years to complete, but once completed it is estimated to be worth €90m a year to the city economy.

At the meeting, Tadhg Daly, CEO of Nursing Homes Ireland, called on Government to relook at the Fair Deal Scheme. To date, there has been a 200% increase in electricity and a 46% increase in gas prices. In the near future, costs are expected to increase by 400%. The Nursing Home sector is on the precipice as they can’t cut hours, reduce staff, or allow standards to fall. They are calling for any new schemes or initiatives to be backdated to July 1.

The CBA said that while overall the retail sector is bouncing back post-pandemic, there are still major challenges for retailers with discretionary incomes squeezed, staff shortages, the rising costs of opening their doors, and because of the reduction of office workers and tourists, albeit tourists made a return over the summer months.

Now is the time to invest in and reinvigorate urban centres like Cork City and there needs to be a strong focus on competitiveness to keep Irish business costs in line with similar EU economies. The recent announcements of new high-end retailers opening shortly at Patrick Street, along with continued investment by indigenous companies is very good news for the city centre and CBA expects that these announcements are just the start of many more to come.

With appropriate management and support, Cork has a bright future in both retail and hospitality and remains a welcoming, value-for-money destination for shopping, socialising, and cultural activities.

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