No U turn on VAT rate for hospitality industry is "hammer blow" says Ashbourne business owner

An Ashbourne business owner who has been forced to close his doors due to spiralling running costs says the government’s decision to reject calls to reinstate the 9% VAT rate for the hospitality industry is a “devastating blow” for the sector.

Russell Bailey made a plea last week for the government to reduce the VAT rate for the hospitality sector in today’s budget after announcing that his restaurant La Bucca is to close at the end of the month due to spiralling running costs.

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 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.

VAT for the tourism and hospitality sectors was reduced to 9% during the Covid-19 pandemic at a cost of €1.2bn to the exchequer.

The previous 13.5% rate was reinstated last August, despite the sector’s opposition.

Talks had been ongoing yesterday to reduce to VAT rate in the sector to 9% but no such reduction was forthcoming in today’s Budget announcement.

Russell who also owns two other La Bucca Restaurants in Ratoath and Dunboyne and Cafe Novello in Ratoath says today’s move was a “hammer blow” for the independent hospitality sector.

“It is devastating, there is just going to be a mass closure of businesses now I think,” he said.

"Everyone in the industry has fought hard to try and get it back to 9% and it is a dark day for everyone involved,” added the business owner.

“You just feel ignored, I don’t think there was even a mention of hospitality during the budget speech.

"It is going to be another year of struggle, another year of closures. The strongest are going to survive but if anyone is close to the edge already this is the final nail in the coffin.”

The restaurateur says he fears that independently run businesses in the hospitality area will disappear over time due to the increasing number of challenges facing them.

"There are already a number of town in rural Ireland who no longer have coffee shops or restaurants and it is just going to get bigger and bigger,” said Russell.

"There is going to be a big void left in communities as each establishment one by one closes down.

"Ireland is renowned for its friendly local restaurants but if things continue the way they are we won't have any left."

Russell who is a Meath rep for the Restaurant Association of Ireland adds that the disappointment was intensified due to false hope given to the industry.

"It’s all of the engagement we have had and the meetings we have had with ministers with no one saying it’s not going to happen. It’s always been left open that it is a possibility and to have that potential of hope and just be landed with a devastating blow instead is a hard pill to swallow.”

The well known business man shocked the community last week with a social media post revealing his plans to close La Bucca. It 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 addition to VAT woes, in January of this year, Mr Bailey 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 last week.

"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.”

Meanwhile the Restaurants Association of Ireland (RAI) called the decision to not reduce the VAT rate as a “devastating blow to a sector already in crisis”.

The RAI today said 612 restaurants, cafés, gastropubs and other food-led businesses have closed since the VAT rate was increased last year and it claimed that over 1,000 more could close over the next year.

“Arriving on top of significant increases in the minimum wage, paid statutory sick days, the upcoming pension auto-enrolment scheme and sky-high energy and food costs, the VAT increase proved the final nail in the coffin for many,” said the RAI.

The Irish Hotels Federation (IHF) also expressed “deep disappointment” and said the Government “has failed to respond in any meaningful way to the commercial crisis facing hospitality food-led businesses”.