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High costs could cause ‘wave’ of restaurant closures

The Restaurants Association of Ireland (RAI) has said it expects a wave of food business closures to continue over the coming months, after more than 280 closed in the last six months of 2023.

The association is blaming high running costs and the increase in the VAT rate for the closures. It said the sector is in crisis.

The RAI is appealing to the Government for support and has published a five-point plan to “save” restaurants and food-led businesses.

The organisation has also appealed to the Government to reinstate the 9% VAT rate and to give business owners more time to pay tax bills warehoused during the pandemic.

It is also seeking a package of supports to offset energy costs and wage increases for workers in the sector.

Adrian Cummins, chief executive of the RAI, said the sector is in crisis

Chief executive of the RAI, Adrian Cummins, said the wave of restaurant and cafe closures seen in the last six months of 2023 will continue this year, unless supports are put in place.

“Over the last six months we have seen over 280 restaurants and hospitality food-led businesses close down,” Mr Cummins told RTÉ News.

“We’re facing a crisis in our industry at the moment in terms of closures, and we’re seeking immediate action from the Government to intervene in terms of saving our industry and saving restaurants and coffee shops across the country,” he said.

There have been four restaurant closures in four month in Killorglin

The RAI has said it compiles its figures on closures in the sector from liquidation lists published by the Companies Registration Office and through contacts with its own members.

It is difficult to independently verify these figures.

The Central Statistics Office told RTÉ News it doesn’t compile specific figures on restaurant closures.

Some corroboration comes from consultancy company PwC, which published data earlier this week saying more than 700 businesses became insolvent in 2023.

‘Irish businesses going insolvent rose by a third in 2023’

The vast majority of these were small and medium-sized enterprises and more than half of them, PwC said, were in the hospitality, retail and construction sectors.

PwC also said the level of insolvencies among Irish businesses rose by one third last year.

“Closures are being caused by a number of factors,” Mr Cummins said.

“The increase in the VAT rate from 9% to 13.5% has rocked our industry to the core. Wage inflation is another factor in the closures and also the warehoused tax that’s due to the State over the next number of months, plus supplier cost increases also,” Mr Cummins added.

The organisation is warning that many towns and villages around the country could be left without a coffee shop or restaurant in the months ahead, unless support measures are put in place.

“We feel we are going to see hundreds if not thousands of businesses close across the state in the next 12 months, if the Government don’t intervene and provide a rescue package for our industry as soon as they can,” Mr Cummins said.

Nicola Lynch is one of the business closures referred to in the Restaurant Association of Ireland figures.

The former owner of the Zest Cafe, Nicola Lynch, said she believes the system failed her

Ms Lynch ran Zest Cafe in Killorglin in County Kerry for 18 years, before she closed the doors for the final time a fortnight before Christmas.

Ms Lynch’s business was the fourth restaurant/cafe to close in Killorglin in the last four months of 2023.

The others were Leaf and Larder, Selina’s Cafe K and Emile’s. Killorglin is a rural town of around 2,500 people on the Ring of Kerry, one of the busiest tourist routes in the country.

Ms Lynch said the costs of running her business – which included an electricity bill for more than €34,000 – became unsustainable.

At its peak, before the Covid-19 pandemic, Ms Lynch was employing 10 people. When the pandemic ended, people were slow to return to work and many have remained working from home. At the same time, energy costs remained high, while other costs, such as food and labour, increased.

The Zest Cafe in Killorglin, Co Kerry closed a fortnight before Christmas

Ms Lynch said the decision to close became unavoidable.

“I made the decision for my own mental health. I couldn’t do another second. I was emotionally and physically burnt out,” Ms Lynch told RTÉ News.

“In the last two or three years I was crippled with anxiety. I would be worried morning, noon and night about how was I going to pay the rates bill, how was I going to be able to pay the banks, how was I going to be able to pay all the suppliers,” she added.

Ms Lynch said she could not keep the business going any longer. Before Christmas, she called the staff together and told them about her decision.

“It was very, very tough. It was devastating,” she said. “They were like family to me and to break the news was just devastating.

A letter from Zest Cafe owner Nicola Lynch urging customers to support local businesses.

“You feel like, after 18 years you close the door and you feel like you’ve failed. It wasn’t until the community here in Killorglin came in and showed such love and compassion to me and all the girls who worked with me for years that you realised you didn’t actually fail, it was just the system that failed you.”

Ms Lynch has posted a note on the door of Zest Cafe, thanking customers for their support.

“Thank you so much for all the laughs, all the tears, all the great memories,” the message read.

She also appealed to them to continue supporting local businesses.

“Make sure to shop local in the town you live in. Otherwise, they too will be like us. We have everything we need right here in this beautiful town.”

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