As a hospitality business owner, you know the challenges of keeping your establishment afloat. But recent findings have unveiled a deeper crisis shaking the Irish hospitality industry to its core.A recent survey by financial consultancy firm Interpath Advisory and the Restaurant Association of Ireland (RAI) has laid bare the severe challenges facing Irish food-led businesses. The findings are troubling: Two-thirds of respondents view the increased VAT rate of 13.5% as the biggest threat to their survival. It’s a tough pill to swallow for an industry already running on fumes.The findings are based on the answers from 86 establishments in the food-led hospitality sector. The results show that many business owners are questioning their future viability.
A Grim Financial Outlook
The survey results are pretty bleak. Over 90% of the businesses surveyed expect their profits to dip over the next year. That’s not just a scary number; it’s the harsh reality for many who’ve invested their blood, sweat, and tears into their businesses.And it’s not just about profits. More than half of the respondents (51.2%) believe their revenues will decrease in the next 12 months. The first quarter of 2024 alone saw 47 insolvencies in the food-led hospitality sector. That’s more than double what we saw at the same time last year. It’s clear that the industry is in serious trouble.Our own recent report, "Irish Food-Led Businesses By The Numbers 2024: Data Trends for the Irish Hospitality Industry", shows just how tight margins are. The average profit margin for food-led hospitality businesses in Q1 2024 was a mere 0.8%. In Q4 2023, the average net loss was 1.6%.
VAT Hike: The Biggest Hurdle
The return to the 13.5% VAT rate has hit businesses hard. Nearly 69% of those surveyed cited it as the greatest threat to their viability. Just a few years ago, the reduced VAT rate of 9% was a lifeline, helping many businesses stay afloat during tough times. Now, with the increase, it feels like the rug has been pulled out from under them.It’s not just VAT that’s causing headaches. Wage inflation is another hurdle, with 12.8% of respondents seeing it as a major threat. As the cost of living rises, employees need higher wages, which adds to the financial strain.Then there’s weak consumer spending, cited by 7% of businesses, which means fewer customers are dining out. It’s a delicate, nerve-wracking balancing act as businesses contend with an increasingly uncertain economic landscape.
Struggling to Keep Up
The survey also shows that over two-thirds of businesses feel that trading conditions have worsened in the last year. That’s a huge percentage, and it’s reflected in their performance. Most businesses (62.8%) said they traded below expectations.Part of the financial strain comes from the tax warehousing scheme that many businesses used during the pandemic. Now, with deadlines for repayment looming, the pressure is mounting. These businesses are being squeezed from all sides.The thing is, these aren’t just numbers on a page. They represent your reality, your daily struggle. Think about your own restaurant, hosting countless birthday celebrations, or your café, where regulars come for their morning coffee. Maybe it’s your pub, where locals gather to unwind with friends. These places aren't just businesses; they’re the heartbeat of the community, and you live it every day.The reintroduced VAT rate is a heavy burden for restaurateurs who’ve already faced so much. Adrian Cummins, CEO of the RAI, has called on the Government to reduce the VAT rate back to 9%. It’s a plea for help, not just for businesses but for the communities that rely on them.
Finding a Way Forward
So, what can be done to help these struggling businesses? Two crucial elements can make a significant difference: leveraging the power of technology and securing stronger government support.Automated accounting solutions, like those offered by Outmin, can streamline operations and provide timely financial insights, helping business owners make smart, quick decisions. At the same time, advocacy for government policies that support the hospitality industry is essential to provide the relief and resources needed to survive and thrive.
Government Support and Advocacy
As we move forward, it's crucial for policymakers to listen to these concerns and take action. Whether it's re-evaluating tax policies or providing some form of financial relief, something needs to happen to prevent further insolvencies and safeguard the future of Irish cafés and restaurants.Businesses depend on robust government backing during tough periods. Groups like the Restaurant Association of Ireland are pivotal in championing policies that support small businesses. Measures such as reducing VAT rates, offering tax relief, and providing financial aid are crucial lifelines for many in the hospitality sector.Effective advocacy ensures that policymakers hear and addresses the concerns of business owners, making a tangible difference in their ability to weather challenging times.
The Power of Automation
For businesses operating on such razor-thin margins, every cent counts. Automated accounting can significantly reduce costs, streamline payroll processes, and optimise cash flow management. This allows business owners to redirect their focus towards strategic planning and enhancing customer service. Outmin is leading the way in transforming how hospitality businesses manage their finances. We’re not just another accounting software – we’re specifically designed for the unique needs of the hospitality business owner.From handling bookkeeping to payroll, taxes, and weekly reporting, we provide a unified financial system that eliminates the need for manual data entry and tedious accounting tasks. Our solution combines advanced AI technology with a team of financial experts who work behind the scenes to manage everything for you.Most importantly, we give you the exact metrics you need to track and improve your business with our hyper-accurate, easy-to-read financial reports. These reports arrive every single week – a stark departure from the traditional accounting timeline, delivering reports with the standard 2 to 6 week lag.
Bottom Line: Stay Proactive
These are challenging times for Irish food-led hospitality, no doubt about it. The recent survey by Interpath and the RAI paints a sobering picture: rising VAT rate, shrinking profits, and increasing insolvencies.Amidst the challenges facing Irish hospitality, staying proactive is key to survival and success. Business owners like you are grappling with tighter margins and uncertain economic conditions, making strategic planning and innovative solutions more crucial than ever.Outmin understands the challenges you face and is here to help you navigate these turbulent times with our automated accounting solution.Get your free demo today to see how we can help you stay ahead of the curve.
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