Business owner forced to close doors due to spiralling costs calls on VAT hike to be reduced in budget

An Ashbourne business owner who has been forced to close his doors due to spiralling running costs is pleading for the government to reduce the VAT rate for the hospitality sector in next week’s budget.

Russell Bailey should be celebrating the 20th anniversary of his restaurant in Ashbourne this month, instead the business owner will be preparing to shut the doors of La Bucca for the last time due to rising costs , VAT rate hikes and constant roadwork disruption that has taken its toll on businesses in the area.

In a shock social media post earlier this week Mr Bailey said:

"It is with a heavy heart that I write this announcement, but unfortunately all good things must eventually come to an end. After almost 20 years of business in the town of Ashbourne, La Bucca restaurant will be closing its doors for the final time on Saturday 19th October.

"There are many factors that have led to this incredibly difficult decision, but above all is the current cost of doing business in Ireland, which makes it increasingly difficult for the sums to add up.”

Signing off with an emotional message to customers, the business owner said:

"I would like to thank our many regular customers for supporting us through the good times and the bad, for helping us survive the recession and the pandemic, which was no mean feat. I hope you all have lasting, happy memories of special occasions that you shared with us.

"I would also like to express my gratitude to the many staff who have passed through our doors over these twenty years. Hospitality relies on a transient workforce and we have been blessed with an abundance of different characters who have made life both interesting and enjoyable."

In August, The Restaurants Association of Ireland (RAI) revealed that a total of 577 restaurants, cafés and other food-led businesses had been forced to close their doors for good since the hike in the hospitality sector’s VAT rate last year.

The representative body said the high figure came less than a year after the government put the VAT (value added tax) rate for the hospitality sector back up from 9pc to 13.5pc.

The VAT rate was dropped from 13.5% to 9% for hospitality businesses from 2011 to 2018 and again during the Covid pandemic from 2020 to 2013 to help the sector and encourage more customers. However, former finance minister Paschal Donohoe warned in 2022 that continued price increases by the sector would affect whether the Government would continue supports, and the reduced VAT rate was ended last year and returned to 13.5%

According to the association, the current tax burden has forced many businesses into an untenable position, leading to widespread closures that could have been avoided had the lower VAT rate remained in place.

The RAI has called for the 9% VAT rate to be reinstated for the hospitality industry, warning of mass closures across the sector if the current rate of 13.5% is maintained.

In addition to VAT woes, in January of this year Russell who also owns two other La Bucca Restaurants in Ratoath and Dunboyne and Cafe Novello in Ratoath told of how he was forced to close his doors in Ratoath 18 times last year due to water outages and feared the constant disruptions had left his business with an uncertain future.

“We should be planning a 20th anniversary celebration in October of this year but I don't know if I'm even going to see it the ways things are going,” he said at the time.

Sadly water outages were not the only problem faced by business owners in the area with on going road works also causing challenges.

"The margins running a business in the hospitality sector are incredibly low and any additional negative impact on the business just makes it virtually impossible for the sums to stack up,” the restaurateur told the Meath Chronicle this week.

“I have five years left on the lease and I would have loved to have seen the lease out but sadly things haven’t worked out that way,” he added.

Russell said a hike in a wide range of costs in recent times has been the perfect storm for the hospitality industry.

"The VAT increased, minimum wage increased, PRSI contributions increased, employers sick pay to staff went from two days a year to five days a year last January. All of these additional costs on top of the constraints of things like the roadworks resulted in the business just not working unfortunately.

"When the margins are so low any form of external impact just makes it virtually impossible.”

The business owner is calling on the government to step in and revert the VAT to its original figure of 9%.

"Getting the VAT back to 9% is an absolute must. If the government had increased the VAT and that was the only increase to impact business, maybe they would have been ok but to have the increase in VAT accompanied by every other additional cost given to SMEs all about in the space of six months was the nail in the coffin for many unfortunately.

“My focus now will be on consolidating the three establishments I have left and hope that the government make a decision on the 1st of October to revert the VAT back to 9%."