Almost 1,600 restaurant workers lost their jobs last month on the back of Government measures that drove up their employers’ costs, according to a leading hospitality trade group.
The Irish Tourism Industry Confederation (ITIC) calculates that increased minimum wage, VAT and social insurance rates imposed in January will add €456 million to hospitality businesses’ wage bills this year and may already be costing jobs.
According to the Restaurants’ Association of Ireland (RAI), 71 restaurants, cafes and other such businesses closed their doors in February as a consequence of the increased costs.
Adam Hallissey, the association’s public affairs executive, says each would have employed an average of 22 staff, leading to the likely loss of 1,562 jobs.
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The RAI’s calculation is based on notifications to the Companies’ Registration Office, its own membership figures and news reports of closures.
The figures emerged as ITIC published a new report by economist, Jim Power, Analysis of Government Induced Costs on Tourism and Hospitality Enterprises, on Thursday.
Speaking at its publication, Mr Power noted that on the basis of the current Government plans, including setting a “living wage”, the extra cost could rise to €1.4 billion in 2026 from €456 million this year.
[ Hospitality sector faces ‘perfect storm’ in 2024 as wage demands increaseOpens in new window ]
Those figures are drawn from the Irish Government Economic Evaluation Service calculations of the likely impact of its measures on hospitality businesses, he added.
“If you have a sector that is operating in a challenging environment where margins are being squeezed and suddenly you impose this extra cost burden, and you expect no consequences from that, you are being very naive,” Mr Power warned.
High-profile restaurant closures this year include Nash 19 and Burnt Pizza, both in Cork, which blamed difficult business conditions over preceding months for their decision.
Tourist and hospitality businesses were already dealing with rising energy and other costs along with falling custom, as inflation hit consumers’ spending power, ITIC chairwoman, Elaina Fitzgerald Kane, pointed out.
She stressed that the organisation did not oppose an increase to the minimum wage, and noted that most tourist businesses paid workers higher rates.
However, she argued that the Government was driving up costs at a time when the industry was particularly vulnerable.
The ITIC wants Government to reintroduce the special 9 per cent VAT rate for the hospitality sector, which now stands at 13.5 per cent.
It also argues that the reduced 8.8 per cent pay-related social insurance (PRSI) rate should apply to the minimum wage entirely, and not just to those making less than €410 a-week.
The group wants Government supports for tourism and hospitality up to 2026 to offset the impact of increasing labour and other costs, as they are the industries most vulnerable to any fallout from these measures.
Dublin is the main gateway on to the island
— Eoghan O’Mara Walsh
Confederation chief executive, Eoghan O’Mara Walsh urged caution on proposed laws governing short-term lets, warning they could limit tourist beds at a time when the State was using one in five of them for humanitarian purposes.
He called for planners to move quickly on State company DAA’s application to have the 32 million a-year limit on passengers at Dublin Airport increased to 40 million.
“Dublin is the main gateway on to the island,” he said.
ITIC also wants Government to support efforts to grow Cork and Shannon airports to their full potential.
Richard O’Donoghue, Independent Ireland TD, who attended the report’s launch in Dublin, agreed that the 9 per cent VAT rate should be reintroduced.
He suggested that this should offset some of the increases from the new minimum wage and social insurance rates.
The Dáil deputy noted that as it stood, Government measures were costing jobs and earnings, as employers were cutting numbers and workers’ hours in response.
