Key Action Points for the Restaurant Industry

1. Retention of VAT at 9%

Since the reduction of the VAT rate from 13.5% to 9% in 2011, over 30,000 jobs have been created in the Accommodation and Food Services sector. Total employment in the sector is now 148,000, accounting for almost 8% of total employment in the economy. When combined with the recent weakness of the euro against sterling and the dollar, the reduction in the VAT rate has driven employment and positively impacted the competitiveness of tourism in Ireland.

Whilst the 9% VAT is significantly rebuilding our economy in the Food and Accommodation sectors, our industry is still experiencing a 3-tier recovery where a divide remain between business in the urban areas and rural Ireland.

Recommendation: Retention of VAT at 9% is crucial in maintaining stability in the food, tourism and hospitality sector.

 

2. Reform of Local Authorities and Commercial Rates

Local authorities in Ireland collected €1.3bn in commercial rates in 2016. In its present state, the system does not reflect ability to pay and has not responded to the fundamental change in the business and economic environment.

Commercial rates for restaurants are currently calculated by rent, rather than by turnover as they are for hotels or public houses. With the advent of upward rents, commercial rates in restaurants have increased throughout Ireland.

Recommendation: comprehensive review of the commercial rates system to fund local government on a more equitatable basis. The system needs to recognise turnover and profit when local authority is calculating rates.

Recommendation:  A ‘holiday rate’ for start-ups to give new owners breathing space when opening.

 

3. Reduction in the Cost of Doing Business

Utility costs and Local Authority charges are a significant burden on SMEs, and these costs been increasing at a rate above inflation. The cost of operating a tourism business in Ireland continues to be higher than the EU average, putting the sector at a disadvantage internationally.

Most restaurants have seen a 30-50% increase in their insurance costs in the past 12 months. Additionally, electricity, waste, water, outdoor seating charges, music rights licences, and other fees add very significant costs to the restaurant business. Labour costs also account for over 30% of turnover in restaurants.

Recommendation: Support tourism enterprises using greener energy sources to combat increasing oil and gas costs.

Recommendation: Reduce the cost of government-imposed red tape by streamlining regulatory enforcement activities and rationalising existing structures and agencies.

 

4. Addressing the Skills Shortage and Hospitality Training

A significant challenge for employers in the hospitality sector is the gap between their need for particular skills and the availability of employees who possess those skills.

The main skills shortages are among suitably qualified chefs.  Shortages of commis chefs feed into shortages at higher levels, so many applicants for chef positions are deemed not to be appropriately qualified. Currently 1800 chefs qualify each year from certified culinary training programmes, but there is a deficit of 5000 chef trainees annually. This reflects the fact that there are not enough chef training centres.  

Recommendation: Creation of a National Hospitality and Training Agency with designated training centres nationwide for new apprenticeships and continuous professional development courses.

Recommendation: Review of work permit applications for chefs, particularly those trained in world cuisine specialities.

 

5. Freezing of the National Minimum Wage

Our minimum wage rate is the 4th highest net minimum wage in the world, and labour costs account for 30 – 35% of overall costs in restaurants and 40% in hotels. In 2016, labour costs in the Accommodation and Food sector in Ireland grew by 2.1%. This high minimum wage make it difficult for businesses in the hospitality industry to remain competitive and grow.

Recommendation: Freeze National Minimum wage until 2021, reform income taxes, and pay related social insurance for lower paid workers.

 

6. Reduction in Employers’ PRSI Contribution

Restaurateurs are entrepreneurs — when a restaurant opens up or expands, up to 30 new jobs are created. We should be encouraging more people to take risks and create employment for themselves and others, through setting up a business or becoming self-employed. To do this, it is vital that they have the same welfare safety net as employees.

Recommendation: Introduction of a PRSI relief system for those hiring new staff, particularly those who take on long-term unemployed workers.

Recommendation: Equalisation of self-employed tax credit with PAYE tax credits.

 

7. Reduction in Excise Duty

Ireland’s wine excise is the highest in the EU, and its beer excise is 1000% higher than in Germany and Spain.  There has been a 62% increase in excise since 2012.  These duties hinder cash flow and prevent SMEs from investing in their businesses. 1,100 people are employed directly by Irish wine distributors and thousands more by the 13,000 restaurants, pubs, and off-licenses that sell wine. These excises affect many people throughout the sector.

Recommendation: Reduction of the excise duty over the lifetime of the next government.

 

8. Non- Introduction of Calories on Menus

The RAI recognises the current need to address obesity in Ireland, and firmly believes that nutrition education would be the best policy direction, rather than legislation on calorie disclosure.  Should Calories on Menus be implemented, the cost for restaurants is estimated to be €5,000 to €10,000, depending on the size of  the establishment.

Recommendation: Calories on menus should not be targeted at stand-alone restaurants.

Recommendation: Introduction of subjects at primary and second levels focusing on healthy eating and cooking.

Recommendation: Mandatory canteen facilities and built kitchens for all new school builds, providing students with easily accessible and affordable dining options.

 

9. Development of Action Plan for Rural Tourism

A balanced economic recovery must be a key objective of the next government. This requires a greater focus on, and investment in, rural Ireland. Large towns and rural areas have seen little to no sign of recovery.  While tourism is on the rise, it is not yet back to 2007 levels.  Tourism is seasonal and slow. The rural areas of Ireland have much to offer for visitors, but they need a boost to get the attention they deserve.

Recommendation: A spatial strategy to help struggling parts of the country, as tourism is the central component to recovery in rural Ireland.

 

The Restaurant Industry

With over 3,500 restaurants in Ireland, the restaurant sector employs 72,000 people (1 in 4 tourism jobs) and contributes €2 billion to the Irish economy each year.  The restaurant sector encompasses a large number of owner-operated SMEs, but is also a crucial supporter of small businesses, local agriculture, and food producers throughout the country.
There has been much good news to report from the restaurant industry over the last 3 years, namely:

  • 57% of restaurants have seen an increase in visitors from outside Ireland
  • restaurants are creating more jobs and opportunities than ever before
  • consumer demand for dining out is on the rise
  • new and innovative concepts are being developed, enhancing our overall tourism offering
  • restaurateurs have reduced costs and menu prices, offering better value to customers

Ireland is a destination with a long established reputation for welcoming visitors. International competition is increasingly fierce, and as a small country we need to ensure that Ireland remains attractive, accessible, and affordable and offers visitors a consistently high quality experience.

 

If you have any questions or would like further information, please call the RAI office on 01-6779901 email info@rai.ie