Business

Anxious pubs and restaurants growing desperate for State help

If Ministers do not come up with a powerful package of measures to help the hospitality sector there may well be a tsunami of closures

Publicans and restaurateurs may differ on the details of their respective VAT campaigns, but both ought to be united in common cause in demanding significant emergency help from the new Government. Photograph: Getty Images

Thu Jul 2 2020 - 10:15

The schism between different factions of the hospitality industry over competing campaigns for VAT cuts only serves to highlight how anxiety is growing in the wider hospitality industry over coronavirus.

Publicans and restaurateurs may differ on the details of their respective VAT campaigns, but both ought to be united in common cause in demanding significant emergency help from the new Government.

If Ministers do not come up with a powerful package of measures to help the hospitality sector in this month’s promised stimulus programme there may well be a tsunami of closures this winter of what are otherwise fundamentally sound businesses, floored not by a lack of demand but by a medical emergency not of their making.

Publicans, aligned with big drink manufacturers, want VAT on alcohol on-sales cut from 23 per cent to 9 per cent across the board. The main lobby group for restaurateurs, the Restaurant Association of Ireland, fears such a precipitous cut would suck up too much Government goodwill and would mainly help the drinks industry. It wants any drink VAT cuts narrowed to help pubs that sell alcohol with meals, or gastropubs.

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No matter what it is or how it is focused, a VAT cut to help pubs and restaurants, and also the wider tourism industry, could prove to be a highly effective and laser-targeted State bailout of the sector.

Traditionally a VAT cut would enable businesses to lower prices, stimulating demand by driving more customers through the doors. But in this crisis the whole point of any VAT cut would not be to lower prices for consumers. Rather, shattered operators would expect to keep prices the same but use the VAT fillip to repair their margins.

This could help businesses – chronically loss-making under social distancing rules – pivot from making huge losses into break even.

VAT is once again a battleground for the hospitality industry lobbying of government.

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