Eoghan O'Mara Walsh: The Budget provides Government with the chance to prioritise indigenous businesses
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With just a week to go before Budget 2025 business leaders are keenly awaiting the tax and spend decisions of Ministers Jack Chambers and Paschal Donohoe. There is a concern though amongst many that, with an election in mind, goodies will be disproportionately dispersed to the public while some serious economic concerns won’t get proper attention.
Of most priority is Ireland’s eroding competitiveness and the mounting evidence that the cost-base of business across all sectors has risen alarmingly. This is particularly so for the Irish tourism industry, the country’s largest indigenous sector and biggest regional employer.
A report by economist Jim Power lays bare the significant increase in labour costs on tourism and hospitality enterprises because of government policy. The raft of measures coming into effect this year - including the move to a living wage, enhanced sick pay and pension auto-enrolment - is collectively set to add €456m to the payroll of businesses in 2024 and as much as €1.4bn by 2026. Even the Department of Enterprise’s own analysis has acknowledged the very negative impact of these labour changes on tourism and hospitality businesses.
No responsible business owner has an issue paying employees better terms for the valued work that they do, particularly within a high cost-of-living context, but for the full burden to be borne by employers is unsustainable. Put simply, too much is being done too quickly.
Last year’s budget wasn’t kind to tourism with a VAT hike and a spending cut – there is an opportunity to reverse these next week.
Latest data on tourism paints a very mixed picture. The North American market may be strong but all other sources of business - from Europe to Britain and even the domestic market – are showing worrying signs of softness.
Britain, our biggest volume market for tourists, is a cause of significant concern with July data from the
Central Statistics Office (CSO) showing arrivals down a whopping 12%. Hotel occupancy and average room rates are weak year to date while in a recent barometer survey of tourism businesses Fáilte Ireland found that 64% of respondents expect profitability to be down this year compared to last.
It all points to a challenging trading environment for Ireland’s tourism and hospitality industry. Latest jobs data from the CSO further underlines this with accommodation and food seeing the largest decrease in employment across all sectors. If there is a drop in tourism jobs in the summer, just think about what winter might hold.
Thus, a pro-tourism Budget next week becomes more important than ever. Vat at 9% needs to be brought back for food services as well as vulnerable downstream tourism sectors such as attractions and activity providers. This is the most effective, direct and sector-specific way of supporting the industry and relieving some of the cost burden.
Tourism is uniquely positioned to provide regional economic balance with 70% of jobs outside the capital. It would be an awful shame if many tourism towns on the Western seaboard continue to be hollowed out by hospitality closures due to high costs.
The Apple tax saga has shown both how vulnerable and dependent Ireland is on multinationals. It’s high-time that Government support domestic home-grown sectors.
- Eoghan O’Mara Walsh is chief executive of the Irish Tourism Industry Confederation