'We are going to see closures and job losses', says Cork restaurant owner as VAT goes back up to 13.5%

RESTAURANT owners in Cork have described the move by the Government to increase the 9% VAT rate to 13.5% from midnight last night as a disappointing decision that will force closures.

Government extended the lower rate of 9% VAT, which was originally introduced as an intervention during the Covid-19 pandemic, for the final time in February. The move back to 13.5% went ahead despite last-minute pleas by business organisations for its retention.

Speaking to The Echo, owner of Sage restaurant in Midleton, Kevin Aherne questioned why the Government has made the decision not to extend the special VAT rate of 9%.

“There is no restaurant looking for a handout. A helping hand and a handout are two different things but it is particularly bad timing going into off-season and in general because costs of electricity are going to go up as well in the winter.

“You’ve got electricity rates going up, staff costs going up, cost of products going up, and now we’ve got the VAT rate going up. The math just doesn’t work,” he said.

“We are going to see closures, and we are going to see job losses,” said Mr Aherne.

“It’s also important that when people think of restaurants, and of eating out and of hotels, it’s supposed to be a joyous occasion, and people should not feel as if they’re obligated to feel sorry for a restaurant because their prices have gone up or they’re being charged more in Vat.”

He noted that the rise to 13.5% Vat from 9% “is not a small hike” and that the Government will end up using it to pay Jobseeker’s Allowance to those within the industry who will lose their jobs.

“That’s a sorry fact to make, but that’s the probability of it, that’s what’s going to happen,” he said.

“It’s not protecting jobs. It’s doing the opposite, and what we should be doing is giving security to people who are in their jobs and ensuring they’re secure in their life as well and getting paid the money they need, but instead we keep on squeezing things, which is just hard for everybody.”

Owner of the SpitJack, Richard Gavin, said he would have hoped that the Government would have looked at “maybe a more dynamic structure” for smaller businesses within the industry instead of taking this approach to hospitality as a whole.

“I think if we look at hospitality, specifically hotels, look at the year that they’ve had,” he said.

“Tourism is back very strong, there’s been an awful amount of hotel rooms snapped up by Government use in terms of dealing with the crisis in Ukraine and the immigration crisis which has given almost 100% occupancy for some hotels. It has removed a lot of the entry-level competitive room rates.

“On the flip side then for restaurants, we haven’t been enjoying that same level of turnover.

“There are hotels around us that have been taken up for Government use and we haven’t had the spillover effect of tourism now from those hotels, so our sales are being impacted by that behaviour from the Government.”

Mr Gavin said that an industry that has yield management at its disposal should not be treated the same as an industry that does not.

“If I could sell every seat in my restaurant every night to the Government, for whatever reason, I wouldn’t be worried about a 4.5% increase,” he said.

“But if you’re going to have that level of interference in an industry, an industry that has small businesses like us that feed off hotels, then you have to be able to protect smaller businesses, and they’ve done nothing to protect smaller businesses; and on top of that, we’re being treated the same as larger businesses now with this blanket increase of Vat back up to 13.5%.”