Cork restaurateur says without Vat changes, businesses won't be able to 'weather the storm'

A CORK restaurateur has said the first quarter of 2024 was “probably one of the worst” he has ever seen in the industry.

Mike Ryan, the Cork chairman of the Restaurants Association of Ireland (RAI) and co-owner of the Cornstore Restaurant, said that without a move to reduce the Vat rate, businesses will be unable to “weather the storm”.

“It’s very stressful,” he said.

“For a lot of people, it’s hard to feel certainty — I can see it on the ground.

“People’s habits have changed, people are very selective with how they spend their money.

“Even if there was a buffer built in, by taking the Vat back to 9%, it would take off a small bit of that pressure.”

“The Government can directly influence what’s happening here with the decisions that they make,” said Mr Ryan.

RAI report on impact of closures

His comments come as a new report, published by the Restaurants Association of Ireland (RAI), found that the average closure of a restaurant costs the State and economy up to €1.36m, resulting in the loss of 22 direct jobs and 13 indirect jobs.

The report, titled ‘The Economic Impact of Restaurant Closures’, conducted by leading economist Jim Power and commissioned by the RAI, was launched as part of its campaign arguing in favour of the reinstatement of the pandemic-era 9% Vat rate for food-led businesses.

The findings showed that an average of two restaurants, cafes, and other food-led businesses are closing their doors for good each day, meaning a total loss of €288m to the economy and State already this year.

This wave of closures can be seen across the country with more than 70 food-led businesses closing in February alone, and most notably in Cork with over five high-profile restaurants exiting the sector since January.

“The Vat rate was at 9% for a long time and it worked,” said Mr Ryan.

“You saw growth in the sector at a time when there was basically a worldwide recession.

“Reducing the Vat will save businesses; they won’t be able to help them all, but it’s going to save a higher percentage than it would be by leaving it up.”

'People are at their limits'

The report further showed that aside from increased Vat, other increased costs are one of the main factors in businesses closing their doors.

These factors include the rise in energy costs and food prices, labour shortages, and the recent introduction of State measures such as an increased minimum wage, statutory sick pay changes, parental leave, and higher PRSI.

“Something has to break,” says Mr Ryan. “With another energy spike, it’ll be worse than the Vat.

“People are at their limits. Any more will be the straw that breaks the proverbial camel’s back.

“There’s no point in being open if we’re not making money.

“It’s hard to put money at the bottom line right now.

“Everyone is struggling, and the realities are that with these interventions, it’s lobbed a lot of pressure on to small businesses across the country.

“We can’t absorb it, there isn’t a big chest of money to use to weather the storm.”