Budget 2019: Hairdressers say 13½% VAT will be ‘crippling’

Hairdresser David Marshall (65) has watched many salons close over the years, including his own flagship store on Dublin’s Dawson Street in 2011.

With the release of today’s budget – which calls for a 4½ per cent increase of the VAT on hairdressing services – he fears more dark days are ahead for the industry.

“This is really bad news,” he says, sitting on a barber chair in his hairdressing school and salon on South Great George’s Street. “I think it’s going to be crippling . . . If you want the best, which I’m trying to provide, it’s becoming nearly impossible for me to afford.”

Mr Marshall says he is managing to “just put a key in the door”, as he is facing high costs of city centre rent, an increased minimum wage and Business Improvement Development taxes levied by the Dublin City Council.

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He said his business projects to lose €20,000 over the course of the year because of the VAT increase.

“We will have to downsize the operation because there’s no way we can continue,” he says. “We certainly won’t be taking on extra employment because it’s not possible.”

Mr Marshall has reduced prices to compete with nearby salons opening in recent years, and fears he will have to work well into his 70s before thinking about retirement.

“That’s on the horizon,” he says. “I can’t see myself retiring.”

Loss of customers

Another concerned business owner is Dalan Guo (35), who has operated Charming Hair and Beauty Salon in Dublin city centre for the past 10 years.

“There’s going to be a lot of salons closing down because of this,” she said.

Ms Guo says she cannot afford to raise prices because she fears she would lose customers in a market wrought with competition.

“This is going to kill the hairdressing business,” she said. “I don’t know anyone that will be willing to do this job anymore.”

If Ms Guo were to raise prices and lose customers, she would need to invest in more social media and marketing materials to increase traffic to the business.

Ms Guo said that despite her passion for hairdressing, she understands why young people interested in working in the beauty industry would choose computer science and marketing careers instead.

“The education can cost just as much, but the job pays less.”

Tight timeline

The current 9 per cent VAT rate was instituted by the government in 2012 to help labour-intensive industries after the economy crashed. It was previously 13½ per cent and will return to that rate beginning January 1st, 2019.

Greg Clarke, an executive member of the Irish Hairdressers Federation, was federation president when the group lobbied for the VAT reduction in 2012.

“People are just now getting back on their feet,” he said. “Businesses are still dealing with overheads and the minimum wage going up.”

Mr Clarke says he knew the VAT rate would not stay at 9 per cent forever, but hopes businesses are able to adjust on such a tight timeline.