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Pubs on track for 50% decline in business for the remainder of 2020

Written by Robert McHugh, on 6th Jul 2020. Posted in General

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A new report shows that even if pubs regain half their normal capacity by  the end of 2020, which is an optimistic scenario, as many as 22,500 jobs could be permanently lost, not to mention countless more in supporting trades like catering, security, and entertainment. 
 
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 DCU Economist Anthony Foley. 
 
This week, one third of Dublin pubs remain closed. Outside of Dublin, 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. 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 – 7,000 businesses nationwide – 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. The report predicts an amended European Commission directive makes it possible to extend and apply a lower VAT rate on on-trade alcohol in Ireland.
 
Commenting on the report, Chief Executive at VFI, Padraig Cribben said, "The greatly worsened post-Covid commercial model – reduced physical capacity, demand and timed customer visits to the pub - puts thousands of jobs and businesses at permanent risk. Most bars will reopen with only 40% of their customers, indefinitely. Pubs closed for four months and are continuing to experience the harsh realities of the pandemic, taking the necessary precautions, and adapting accordingly. Government policy needs to adapt too."

He added, "A reduction in the VAT on alcohol would deliver an immediate support to these businesses and instantly improve their commerciality, supporting the initial recovery phase and survival of pubs over the next few months as demand is reduced and costs increase. The alternative is many bars will never open again, and the pre-Covid employment and economic contributions will not be recovered."

Source: www.businessworld.ie

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