TLDR: Publicans are celebrating the return of the reduced VAT rate on food served in pubs, reverting to 9% from 13.5%, but are urging the government to complement this with a cut in drink excise rates. Despite a welcome dip in hospitality insolvencies, many establishments, especially those not serving food, are still grappling with rising costs and closures.
As the hospitality sector gears up for a change, publicans are looking to strike while the iron is hot with the reintroduction of the reduced VAT rate on food served in pubs and other outlets. Dropping back to 9% from 13.5%, this shift, effective Wednesday, has been met with relief from the Licensed Vintners Association (LVA). Their CEO, Donall O’Keeffe, expressed contentment over finally seeing the VAT reduction come to fruition, having campaigned for it since its initial proposal for removal.
Still, while the measure aids those serving food, O’Keeffe points out a significant gap: many pubs don’t serve meals and thus won’t benefit from the VAT reduction. With expenses ballooning due to rising wages—up 35% since the pandemic—and inflation hitting 17%, the LVA has been vocal about the need for additional support. As pubs shutter across the country, the call for a drink excise cut ahead of Budget 2027 is becoming more urgent. “With pubs continuing to close their doors for good all around the country, we would ask that the Government keep this in mind ahead of their formulations for Budget 2027,” O’Keeffe added, laying it out clearly that bar owners are not asking for much—just a fighting chance.
Interestingly, recent reports indicate a decline in insolvencies within the hospitality sector: PwC noted a staggering 26% drop in closures compared to last year, while Deloitte highlighted a 14% fall—a positive sign for struggling establishments. James Anderson from Deloitte pointed out that while he doesn’t foresee the VAT cut saving businesses from insolvency, there might be two possibilities behind this recent respite: either proprietors are banking on the lucrative summer season or the impending tax relief is fostering a last-minute surge in confidence.
However, the stubborn problem of attracting and retaining staff remains, coupled with ongoing pressures from energy costs. The VAT reduction is projected to cost the exchequer €232 million through the end of the year and a whopping €681 million annually. Now, you’ve got to wonder where all that revenue is going if bars are still struggling. Perhaps it’s time to rethink how the government supports an industry that is arguably the heart of our social fabric.
To add a layer of intrigue, did you know that according to the latest data, the average pub in Ireland has been serving drinks for just over 10 years? That’s fewer than many relationships last these days! Let’s hope that with the right support, more can build lasting bonds with their patrons and stay in the game a little longer. For the sake of our late nights and early mornings, let’s raise a glass to that!
