Failure to cut Vat in Budget 2025 a 'devastating blow' to pubs and restaurants
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The Government’s decision not to reinstate the 9% Vat rate for the hospitality industry has been deemed a “devastating blow” for the sector, with fears that Tuesday’s move could push over 1,000 more businesses to shut in the next twelve months.
Despite strong pushes for a reduction in the rate of Vat, Enterprise Minister Peter Burke was unable to secure support from Coalition leaders to enact the move.
Reacting to the decision, the Restaurants Association of Ireland (RAI), Irish Hotel’s Federations (IHF), the Vintners’ Association of Ireland (VFI) and the Licensed Vintners Association (LVA) expressed disappointment and frustration, warning that newly announced measures fall “disastrously short” of what is needed to protect the hospitality industry.
Speaking on the decision, the RAI called it "tone deaf," citing a recent survey finding that 74% of businesses would be forced to strongly consider closing their doors if the 9% Vat rate was not restored. The association said:
The Government’s decision will push over 1,000 more businesses into closure over the next 12 months, according to the RAI.
Speaking on Budget 2025, VFI chief Pat Crotty called it a disaster for the sector, adding: “We have been clear with the Government about the immense pressure pubs are under, yet they have failed to deliver any meaningful support.”
“Every minister and TD fully understands this Budget will lead to closures for a huge number of businesses across the country.”
Donall O’Keefe, CEO of the LVA said the Budget showed “how little the Government has been listening to the hospitality sector.”
President of the IHF, Michael Magner said the Budget did “next to nothing to address the enormous challenges confronting the sector,” adding that “half-baked” measures fell far short on what was needed.
As part of Budget 2025, Public Expenditure Minister Pascal Donohoe introduced an Energy Subsidy Scheme worth €170m for hospitality and retail businesses struggling with rising energy costs, which he said would provide support to 39,000 firms. This equates to around €4,300 per business.
Reacting to the measure, the RAI called it “insignificant and insulting,” warning that the measure will only cover the annual increase for 2.4 full-time employees on minimum wage.
“The €4,000 piecemeal grant constructed by the Government at the 11th hour as an alternative to meaningful action will be totally inadequate to keep over 1,000 doors of restaurants, cafés and other food-led businesses open over the next year,” said Mr Cummins.
Mr Magner of the IHF added:
Since the beginning of 2024, hundreds of food businesses across Ireland have permanently shut their doors, with many citing spiralling costs.
Across Cork, several well-known restaurants including Nash 19 and Tung Sing have closed since the start of this year.
When asked about the disappointment within the hospitality sector — particularly around the temporary Vat rate of 9% not being reinstated — Finance Minister Jack Chambers said when they agreed the summer economic statement, the tax package was set at €1.4bn and there was a “limited scope” to do anything beyond income changes which were brought through to address wider wage growth in the economy.
Mr Chambers did acknowledge that there were cost issues in the hospitality and retail sectors and that is why they worked with Enterprise Minister Peter Burke to introduce the new Energy Subsidy Scheme.
“We have introduced a new scheme, which is a targeted version of the previous Cost of Business Scheme, which Mr Donohoe has worked with [Enterprise Minster] Peter Burke on to direct support to the retail and hospitality sector,” Mr Chambers.
This new scheme will see 39,000 businesses receive on average €4,000 to meet energy costs.