Report finds over 8,000 jobs are at risk in Wexford drinks sector
AROUND 8,070 jobs could be at risk within the drinks sector in County Wexford, according to a recent report by DCU economist Anthony Foley.
The report was commissioned by the Licensed Vintners Association (LVA), the Vintners Federation of Ireland ( VFI) and Ibec representative group Drinks Ireland, and was initiated as part of a wider ‘Protect Our Pubs’ campaign.
The report indicated that on-trade alcohol sales will decline by 50 per cent or more for the remainder of this year and, according to Mr Foley, that is the most optimistic expectation.
The report also revealed that 265 pubs in Wexford are in line for such a reduction in business for the remainder of 2020.
Local Ferns publican Tom Dunbar, who is also on the VFI national executive, said the situation in County Wexford is critical.
‘We were led to believe we would be opening up and then the date was changed but all the while we have been given no specific guidelines,’ said Mr Dunbar.
‘We have no regulation at all with regard to what we should be doing, yet 99 per cent of people are trying their best to do things right,’ he added.
Mr Dunbar said it’s ‘very frustrating’ that 40 per cent of businesses around the country can open up because they serve food but ones that don’t can’t open.
‘It’s nonsensical really,’ he said. ‘I am in this business around 50 years and I am told, essentially, that I cannot run my business when someone up the road can because they serve food,’ he added.
Emphasising that he is fully supportive of pubs that serve food opening up Mr Dunbar said it’s not a level playing field and that pubs that don’t serve food should also be allowed open.
‘It doesn’t make any sense to me at all and it’s not fair,’ he said.
‘What are the pubs that serve food doing better than anyone else within whatever guidelines are there? And again, we haven’t been given specifics on that.’
He highlighted the fact that pubs were among the first businesses to close and that those in the trade across County Wexford did everything that was asked of them.
A lot of work has gone into preparing to reopen again but then the date is changed and that’s a slap in the face for a lot of publicans.
‘I am actually in the vulnerable age group so I’m not going to allow people do stupid things,’ said Mr Dunbar.
‘What is the difference between me and people serving food?’
He estimated that between 25 per cent and 30 per cent of rural Irish pubs are open and if the proposed opening date is changed again, it could have very serious consequences for business across the county and country.
‘You’re already looking at businesses being closed for five months and if that stretches to six months – half a year – that will put a lot of pressure on people,’ he said.
Mr Dunbar also highlighted the fact that each pub owner faces their own set of challenges as a result of the enforced closure to-date and that the muted stimulus package due to be announced this week by the Government will have to include financial and other supports for small pub owners across the country.
‘Pubs are all in different situations and I would say a good percentage of rural pubs won’t open again,’ he said.
‘I can go to Greece for my holidays if I wanted to but I can’t go to my pub down the road for a pint because they don’t serve food,’ he said.
Mr Dunbar also said that premises are being devalued at the moment too. ‘Imagine trying to put a pub up for sale at the moment,’ he said.
‘The VFI has said all the time that we should either be closed or open and I find it insulting to be told that I cannot run my business,’ he added.
In his report, Mr Foley concluded that consumer demand will be lower after lockdown due to higher levels of unemployment and reduced earnings.
Ominously, the report also predicted that it will likely be 2023 before the country, in general, reaches pre-Covid labour market conditions
The organisations that commissioned the report are now calling for a temporary reduction in the VAT rate on alcohol sales in pubs as one means of supporting pubs in the short-term.
The report found that most bars will reopen with only 40 per cent of their customers, indefinitely.
‘Our most optimistic market expectations for the second half of 2020 are that on-licence alcohol sales will be at most 50 per cent of what is usual,’ said Mr Foley, when commenting on the report.
‘Even if Wexford’s 265 pubs regain half their normal capacity by the end of 2020, which is an optimistic scenario, as many as 4,035 jobs could be permanently lost,’ he added.
It’s not just the direct jobs within the pub trade that could be affected, as other roles are under threat including those in supporting trades like catering, security, and entertainment.
This week, over 60 per cent of pubs remain closed and for those that have either reopened or plan to reopen in the coming weeks, Government guidelines will mean significant changes in how they operate with reduced capacity and time-limits on customer visits.
A recent LVA/VFI report outlined that for pubs operating under social distancing guidelines, when applied in any 100m area in an on-licensed premises, standing capacity will diminish to 12.5 per cent with seating capacity reduced to 34 per cent of pre-crisis levels.
Another significant aspect of Mr Foley’s report is that it highlighted the fact that the drinks sector is dominated by small businesses which those within the industry say are at risk of shedding half their employment capacity is supports are not made available.
The LVA, VFI and Drinks Ireland are 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) sector, until December 31, as part of the July stimulus package promised by Government.
The measure is being sought to support Wexford pubs, and those across the country, which 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 per cent VAT from 23 per cent VAT is €143m.
The three organisations also said an amended European Commission directive makes it possible to extend and apply a lower VAT rate on on-trade alcohol in Ireland. They also say that such a measure would be in line with other EU countries like Spain, Italy and Cyprus, which are using temporary reductions in VAT to provide immediate support to their drinks, hospitality, and tourism sectors during the Covid-19 crisis. In the UK, a lower VAT rate for the tourism sector – including pubs, restaurants and hotels – is currently being considered.
Those within the sector anticipate that economy-wide and hospitality-related levels of consumer demand will be lower after lockdown due to the higher level of unemployment and reduced earnings and it will more likely be 2023 before pre-Covid labour market conditions are reached again.
Commenting on the report, Donall O’Keeffe, CEO of the LVA, said: ‘About one third of the alcohol revenues generated by the on-trade sector, including public houses and other licensed premises, is taken by Government and diverted from customers, staff, entrepreneurs and investment.’
‘This very large tax burden is not justifiable in the exceptional circumstances we are in faced with,’ he said.
‘All businesses must adapt and adjust to the new reality which the drinks and hospitality industry has done [and] now, Government and the Exchequer must adjust its tax expectations accordingly and support one of our key domestic industries,’ he added.
Patricia Callan, Director of Drinks Ireland, said that the recent government report ‘Economic Considerations for Reinstating Economic Activity’ concluded that Wexford’s accommodation and food sector, including pubs and restaurants, had a high vulnerability to permanent damage or output loss.
‘We must act now and provide support to critical industries with ambitious policy decisions,’ she said.
‘Traditionally, a VAT cut would enable businesses to reduce prices and stimulate demand [and] in this case, we are seeking a temporary VAT cut on alcohol to support businesses,’ she added.
‘This type of policy measure is the direction we need to go.’
Padraig Cribben, Chief Executive of the VFI, said the post-Covid model of 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 per cent of their customers, indefinitely,’ he said.
‘Wexford’s pubs closed for four months, are continuing to experience the harsh realities of the pandemic, taking the necessary precautions, and adapting accordingly,’ he added.
However, he said Government policy needs to adapt too.
‘A reduction in the VAT on alcohol would deliver an immediate support to these businesses and instantly improve their [commercial potential], supporting the initial recovery phase and survival of pubs over the next few months as demand is reduced and costs increase,’ he said.
‘The alternative is that many bars will never open again, and the pre-Covid employment and economic contributions will not be recovered,’ he added.