Additional supports for restaurants will only delay the inevitable

With the closure of a number of high profile restaurants in recent weeks, voices within the hospitality sector are once again calling on the Government to roll out sector specific supports, including the extension of the nine per cent VAT rate, for businesses amid elevated energy prices and looming Covid-era tax debts.

But while they were appropriate during the pandemic, keeping many restaurants, cafes and bars ticking over and saving jobs during the worst of the public health restrictions, these measures will probably only delay the inevitable.

Insolvency experts and economists have long anticipated that a wave of business closures would follow at some point after emergency measures were wound down and trading approached something like normality.

That wave has not yet materialised, despite anecdotal evidence to the contrary, but insolvency practitioner Declan de Lacy told The Irish Times this week that it may be in the offing as soon as the first quarter of next year when, among other things, the Government’s vaunted tax debt warehousing comes to a close.

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No longer buttressed by emergency supports, unviable businesses across a range of sectors, not just hospitality, will end up on the scrap heap as a consequence. It may be particularly acute in the restaurant industry, which is more sensitive to the vagaries of taste and fashion than others.

A restaurant that became unfashionable in 2019 and would have been shuttered in the natural course of things in 2020 may have been given a stay of execution by the Government’s Covid supports. In 2022, it will now find itself operating in a completely altered landscape. If it can’t adapt, it will fail. If it remains on life support, however, it may only block the way for new entrants, particularly in Dublin where real estate is at a premium and the market has arguably been at saturation point for a number of years.

That is not to say that struggling restaurants currently feeling the pinch shouldn’t be given a lifeline. And for those with a reasonable prospect of survival, that’s exactly what the Small Companies Administrative Rescue Process (Scarp) is meant to be, yet just 11 companies have engaged with the process since its roll-out in 2021. But the clock is ticking for restaurant and other SME owners to get the Scarp ball rolling before the warehousing scheme draws to its conclusion. Time, as de Lacy said this week, is of the essence.