Hairdressers call for VAT cut amid flatlining demand for services

Hairdressers are calling on the Government to cut the industry’s VAT rate to 5 per cent from 9 per cent amid a decline in demand for its service against the backdrop of rising inflation.

A survey of almost 300 Irish Hairdressers’ Federation (IHF) members indicates that close to half (47.5 per cent) experienced a decline in consumer demand in the second half of the year as rising prices continued to erode their customers’ disposable incomes. Roughly one quarter of respondents, meanwhile, said that demand had remained the same.

When asked what measures Government should take to help the industry, “the response is overwhelmingly in favour of reducing or at least maintaining the VAT rate”, the IHF said.

The current reduced 9 per cent rate of VAT was originally applied to the industry in 2011 in response to the economic downturn and was reintroduced in 2020 to help offset the impact of the Covid-19 pandemic on in-person services.

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It is due to expire in February but the IHF is now calling on the Government to not only extend the reduced rate but cut it to 5 per cent, having reduced the rate of VAT on newspapers to zero from New Year’s Day.

Employment surge

In a statement, the IHF said employment within the industry is likely to have risen to 21,000 in the third quarter of last year, based on Central Statistics Office data. This is five times more than the number of people employed by newspapers, it said, representing almost 0.8 per cent of total Irish employment.

Against the backdrop of soaring costs, the report – prepared by Octavian Economics on behalf of the IHF – indicates that the industry is more exposed than many others to adverse economic developments and that unemployment within the industry “has the capacity to rise very rapidly”.

The industry has also taken a particularly long time to recover from the pandemic, according to the report, having faced an “existential crisis” at the height of the crisis in 2020.

“Unlike newspapers and many other services in the economy, we couldn’t deliver our services online,” said IHF president Danielle Kennedy.

However, she said the data shows that the industry “rewarded” the economy by increasing employment by 25 per cent following the first VAT cut in 2011.

“With demand falling faster than in 2011 and business costs far higher, VAT must fall accordingly,” Ms Kennedy said. “These findings come before the full impact of inflation and interest have fully impacted on the economy and consumer demand. They understate the crisis in our industry.”