High-rate VAT ‘killing hospitality’ in Ireland

Duncan Maguire is feeling “raw” after he and his wife Lou Leahy decided to permanently close the doors of Ukiyo, their late-night karaoke bar, on Wednesday.
“It has been death by a thousand cuts, particularly since the pandemic,” said the business owner, who ran the Korean-style restaurant and bar in the heart of Dublin 2.
Maguire opened the karaoke bar in 2004 as ”something different” for the Dublin night-time scene and it attracted attention from the beginning for its entertainment and food.
Soon the Maguires increased the number of staff to 27 and carried out an expansion that included the 2018 conversion of a basement to add more karaoke booths.
July was the business’s 20th anniversary and the red corner bar on Clarendon Street marked it proudly with a gold-leaf crest painted on its window. One month later, however, and the Maguires had to pen a final post on the bar’s Instagram page to announce its closure.
Speaking to The Sunday Times, Maguire said the company “survived a financial crash, an expansion and the pandemic and now has to close down because margins are so tight”.
“The final nail in the coffin” for the entrepreneur was the increase of the VAT rate in September last year which Maguire called a “small decision by government” that carried “severe consequences”.
The Dubliner said the company absorbed the 4 per cent increase in food and drink costs instead of putting up menu prices. Last year VAT was raised from 9 per cent to 13.5 per cent after it had been lowered for much of the pandemic to help struggling restaurants stay open.
“It added an extra €1,000 onto our weekly bill,” he said. “We already had to deal with a rise in our energy costs that saw our electricity bill increase by €1,000.
“We are a small business running on already tight margins and we had to pay an extra €2,000 a week all of a sudden. Over the past year we will have paid close to €100,000 a year on the VAT increase and energy costs haven’t been coming down.”
In January the company’s salary bill rose when the minimum wage went up to €12.70 per hour. Maguire said that was also difficult for a business that employs 27 people: “Wages now account for 30 per cent of our outgoings.”
Other factors were in play, with Maguire saying fewer people were coming into town at weekends. “Our clientele are aged between 25 and 60 but they have all been hit by the cost of living crisis,” he said.
Ukiyo was also facing competition as other venues around the city have pitched in on the karaoke bar experience, including Maneki in Dawson Street, Wigwam in Abbey Street and Marrakesh by Mindo in Capel Street.
The news comes a week after celebrity chef Dylan McGrath announced that he would be pulling the plug on Rustic Stone and Brasserie Sixty6 after nearly 14 years in business.
McGrath cited “economic pressures” in the city centre as a reason why the business was no longer viable.
The vegan takeaway V-Face announced its closure on Wednesday. The restaurant was opened in 2021 by Sarah Boland who posted on its Instagram page to say she had a “heavy heart”.
Adrian Cummins, the chief executive of the Restaurants Association of Ireland, said: “There will be many more restaurants closing in the coming weeks. The government has to lower the VAT rate to 9 per cent in the next budget. There are so many business owners waiting to see what happens in October. They will close before Christmas if things don’t change.”
It is not only Dublin feeling the pinch; owners of the Dundalk restaurant McAteers The Food House, which welcomed a visit from President Biden, announced its closure last week too.
Its owner Jerome McAteer said on RTE Radio 1 that the deli had been busy since that visit but costs were making it “harder to trade” and he had no choice but to shut shop and let go his 19 staff.