Elbows out - there's fewer pubs per head of population in Kildare than in many other counties. File photo via Pixabay
‘Even if Sligo and Leitrim’s 254* pubs regain half their normal capacity by the end of 2020, which is an optimistic scenario, as many as 6,278 jobs could be permanently lost, not to mention countless more in supporting trades like catering, security, and entertainment,’ according to a report authored by DCU Economist Anthony Foley published today (Monday, July 6).
The report, commissioned by the Licensed Vintners Association (LVA), the Vintners Federation of Ireland (VFI) and Ibec representative group Drinks Ireland, as part of the ‘Protect our Pubs’ campaign, states that on-trade pub alcohol sales will decline by 50% or more for the second half of 2020 and this is ‘our most optimistic market expectation,’ said economist Anthony Foley.
This week, over 60% of pubs remain closed – small businesses in our cities, towns and villages. For the pubs that have, or intend to reopen over the coming weeks, Government guidelines will mean a significant change in how they operate with reduced capacity and time-limits on customer visits.
A recent LVA/VFI report outlined the stark impact on capacity of operating under social distancing guidelines. When applied in any 100m² area in an on-licensed premises, standing capacity will diminish to 12.5%, while seating capacity is reduced to 34% of pre-crisis levels – 66% of capacity is wiped out.
The report states that over 50,000 people are employed in the drinks industry in Ireland. It finds that of the 19,205 businesses in the hospitality sector (pubs, hotels, restaurants), 96.5% of these employ less than 50 persons meaning the sector is dominated by small businesses – businesses that are extremely exposed and at risk of shedding half their employment capacity should supports not be made available.
The LVA, VFI and Drinks Ireland is calling for a temporary reduction in the hospitality VAT rate; and extending it to apply to alcohol sales in the on-trade (pubs and bars), until 31 December 2020 as part of the July stimulus package promised by Government. The measure is being sought to support pubs – Sligo businesses – who will struggle in the short term until they can resume operating and viably trade at increasing levels of capacity in 2021 and beyond.
According to detailed analysis contained in the report, the cost of reducing the likely second half 2020 on-licence alcohol sales to 9% VAT from 23% VAT is €143 million. An amended European Commission directive makes it possible to extend and apply a lower VAT rate on on-trade alcohol in Ireland - a fact unknown to many who believe it may be disallowed under EU VAT Directives.
EU and UK
Such a measure would be in line with other EU countries like Spain, Italy and Cyprus, which are using temporary reductions in VAT to provide immediate support to their drinks, hospitality, and tourism sectors during the Covid-19 crisis. In the UK, a lower VAT rate for the tourism sector – including pubs, restaurants and hotels – is an option currently being considered. Measures are due to be announced later this week as part of their economic statement and fiscal stimulus.
The ‘Reduce VAT on On-Trade Alcohol’ report was published as part of the ‘Protect our Pubs’ campaign by LVA, VFI and Drinks Ireland which seeks to highlight the important social and cultural role that the drinks and hospitality industry play in our communities and to demonstrate the loss that would be felt should some pubs not reopen due to Covid-19.