The Supermac’s Managing Director, Pat McDonagh, has called on the Government to reintroduce the 9% VAT Rate for the hospitality sector in the upcoming budget.
Mr McDonagh said that the future of hundreds of small businesses will depend on decisions made by the Government over the next few weeks and that these decisions will have long term repercussions for the country.
“The industry is struggling to deal with increase in operating costs linked to changes in employment law, including increases in the national minimum wage, and higher energy bills,” he said.
“Figures from the Restaurants Association of Ireland (RAI ), indicate that 270 restaurant and food-led businesses have been forced to close this year in the face of rising costs. If you add up all the additional costs, margins ) are down 12-15 per cent,” he said.
“What do you do to control that? You either cut back on labour or put-up prices. But you can’t put up prices to cover all your costs or you will become uncompetitive.”
Mr McDonagh, who also owns and operates the SÓ Hotels group, said the cost spike had coincided with a contraction in disposable income. “People are cutting back on their spend,” he said, “and VAT is the most efficient way to alleviate the pressure on businesses without depressing wages for workers.
Mr Mc Donagh called on the Government to use the upcoming budget to carve out food from hospitality and reintroduce the reduced 9 per cent VAT. “The decisions that the Government will make over the next few weeks will have long term implications across society. We are a country that supplies some the best food in the world.
“We are known across the globe for the quality of our meat, dairy and grain. This quality produce is important for domestic consumption and vital as a key pillar of our tourism industry. The Government needs to be careful not to damage that by facilitating a race to the bottom in terms of quality,” Pat McDonagh said. “We need to look at where we want our restaurants to be in 20 years time and I believe we need a thriving, competitive food service sector.”
The RAI has been campaigning for the lower rate to be reinstated for the industry in the coming budget. According to the association, a typical food business with a turnover of €1 million will see its total costs increase by €97,000 this year. The single biggest driver, accounting for €37,000, relates to the increased VAT rate followed by wage inflation (€36,000 ); increased supplier costs (€13,500 ). Pension auto-enrolment, which is incoming, has been costed at €5,000.
