Concerns and fears over the future of small businesses in Ireland have been growing in the hospitality sector
A survey has found that 65% of participating Irish restaurants are concerned about closing in the coming months, with inflation and staffing pressures cited as the leading cause for concern.
Just under two-thirds of restaurant participants shared concerns that they would have to close in the next 12 months, with 67% of hospitality businesses showing general concern for what the coming year will hold.
The study of 133 restaurants and hospitality businesses across Ireland was carried out by The Kroll Business Sentiment Survey of Restaurants & Hospitality, in partnership with the
Restaurants Association of Ireland.
VAT rate
The release of these findings, follows the news of the extension to the Special 9% Vat rate for the
hospitality sector. However, the authors of the study pointed to concerns over warehousing additional revenue liabilities. Over a quarter (27%) of businesses surveyed, that availed of the tax warehousing scheme, indicated they would not have been able to pay the associated debt in the next 12 months if the Revenue’s Tax Warehouse Scheme wouldn’t be extended, while a further 12% were unsure if they would be able to repay the debt.
Energy crisis
The hospitality industry reported coming under significant pressure as a result of rising energy costs. A third (33%) of those surveyed reported an increase in energy bills of more than 100% in the past six months. A further 24% reported increases of 75%, and 31% of businesses saw increases of 50%. The study found that rising energy costs were contributing to a reduction in operating hours which was reported by 45% of businesses, with a further 36% of participants reducing their headcount; 30% planning to reduce their menu options; and 80% of participants planning on increasing the price of their products or services.
Staffing challenges
The study found that access to talent coupled with inflationary pressures has led to "increased salary expectations and [have] brought renewed pressures on the hospitality sector".
More than half of businesses (51%) surveyed reported their staffing costs are increasing due to a challenging labour market, with 84% of all surveyed expecting to increase staff wages in order to retain employees.
The majority of participants in the research believe it will be difficult to recruit and retain staff over the next 12 months. Some 79% indicated it will be a challenge. However, almost half (49%) of respondents suggested they will not be increasing staff levels in 2023.
The current recruitment crisis has been compounded by the cost of living crisis coupled with a drop in experienced staff returning to the sector after Covid-19 restrictions were lifted, with
research showing that many opted for a career outside of hospitality.
Anecdotally at
Lovin Dublin, not a day goes by without seeing several posts looking for staff and it's strange to see a hospitality business without a "staff wanted" sign pasted on the window these days. We've also reported on several hospitality businesses that have had to implement reduced hours, even close for days at a time due to staffing restraints or
pause opening altogether.
Some 14% of businesses said they will require professional restructuring assistance in 2023 with a further 26% unsure on whether this will be required at this stage.
"A number of issues, including staffing and inflation, have put restaurants and hospitality businesses under pressure, but others, including supply chain issues, footfall in urban centres post-COVID-19 and rent pressures are also impacting them. Government supports will be an important feature of the survival of businesses over the coming year," said Adrian Cummins, CEO of the Restaurants Association of Ireland
Declan Taite, Managing Director in Kroll’s Restructuring Advisory practice, said: "Businesses across all sectors, but particularly the hospitality industry, find themselves in a precarious economic environment, where rising costs and a challenging labour market are compounding their growth potential. Many will be restructuring to mitigate the risk of closure, although worryingly, the majority of participants in this research indicate closure is a real concern for them.”
“It is perhaps not surprising but nonetheless interesting that participants reported the government supports—reduced VAT and tax warehousing—were crucial over the past year, without which they might have closed. Some 61% say they would not have survived were it not for government support. With so much uncertainty for many at this time, it will be important for businesses to plan accordingly.”
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