Restaurants seek €1.8bn bailout amid threat of 50% closures

Economist warns it may take two years for restaurants to see pre-Covid business levels

The Restaurant Association of Ireland wants the State’s subsidised wages scheme  to be extended beyond the current scheduled expiry in August. Photograph: iStock

The Restaurant Association of Ireland wants the State’s subsidised wages scheme to be extended beyond the current scheduled expiry in August. Photograph: iStock

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The Restaurant Association of Ireland is seeking a package of supports totalling €1.8 billion, amid claims that one in every two businesses in the industry faces closure as a result of damage caused by the coronavirus crisis.

The lobby group is looking for the State’s subsidised wages scheme, which has supported the income of almost 500,000 workers across the entire economy in recent months, to be extended beyond the current scheduled expiry in August.

A report written for the industry group by economist Jim Power argues that restaurants, which are preparing to reopen their doors on June 29th following a lockdown of more than three months, will take up to two years to return to the level of business they were doing before the pandemic hit. It wants financial support to meet labour costs to continue for that time on a “gradually reducing basis”.

Support

The representative body is also looking for taxpayers to step in and cover rates, water and street furniture charges for two years, cut VAT for the sector to zero until the end of 2021, and introduce a scheme to cover between 25 per cent and 100 per cent of restaurants’ rent for a period to help them get back on their feet.

“The proposed measures would cost around €1.8 billion in a full year,” the report said. “However, the costs of not providing adequate support and allowing thousands of businesses die, would far outweigh those costs.

“It is conceivable that, without adequate support during this 24-month period, up to 100,000 jobs could be lost in the sector. Such an outcome would impose a very significant cost on the exchequer, which could be as high as €2.8 billion [a year].”

The report said that €2 billion of those costs would come from increased spend on social protection, with a further €500 from lost payroll taxes.

The Government projects that it is already facing a budget deficit of up to €30 billion this year as it deals with a surge in spending to support the economy and as well as an expected fall-off in tax receipts amid coronavirus.

The reopening of pubs and restaurants at the end of the month under the third phase of easing lockdown restrictions is being set against strict guidelines from Fáilte Ireland, the tourism agency. Customers will be restricted to spending a maximum of 105 minutes in an establishment.

Where the 2m rule of physical distancing is not possible, businesses will be permitted to implement 1m distancing in controlled environments as long as other risk mitigation requirements have been met and pre-booked time slots are in place.

Payment moratoriums

The Restaurants Association also wants Government backing in seeking loan payment breaks of up to two years. Banks have offered payment moratoriums of up to six months to households and businesses hit by the coronavirus shock.

The lobby group is also looking for excise duties on alcohol to be reduced.

“The restaurant sector has been impacted in a devastating fashion by Covid-19. Once it reopens, the trading environment will be extremely challenging as a result of social-distancing requirements, various health protocols, the absence of overseas visitors and consumer nervousness,” said Mr Power.

“It seems clear that many restaurants will struggle to survive in the challenging environment ahead, but it is equally clear that in order to rebuild the economically vital tourism sector over the next couple of years, it is essential that we have an abundance of high quality restaurants in the country.

“It is essential that the restaurant sector gets the maximum possible support from Government, to get the sector through the difficult times ahead.”

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