Up to €2,000 per week: the fixed costs that more than a fifth of Irish pubs must sustain while no income generated in lockdown – new survey

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The Covid-19 economic support packages were not designed to cope with the current pattern of additional and regular disruptions. Permanent demise of a large section of the drinks and hospitality sector should be avoided in the interest of economic and employment recovery – DCU Economist report

  • Impact on both businesses and people stark as 60% of publicans say they would struggle to find another job outside of the hospitality industry
  • One in four publicans report a decline of over 50% in trade compared to 2019
  • Half of publicans have already had to let staff go permanently as a result of the Covid-19 pandemic
  • 15% of publicans have accumulated over €50,000 in debt due to Covid
  • 90% believe that the government does not understand the full magnitude of the challenges facing pubs, restaurants, and hotels
  • DIGI chair: “It’s not until you see statistics like these that you fully understand what the sector has endured for the past seven months. As the entire country is placed on Level 3, the sector requires targeted support. We’re calling for a cut in excise tax in Budget 2021.”

More than a fifth of pubs in Ireland have continuing costs of up to €2,000 a week to sustain while generating no revenue during lockdown, according to new research from the Drinks Industry Group of Ireland (DIGI).

The research, conducted among 1,085 publicans in Ireland last week, reveals that over one fifth (22%) have incurred continuing costs of between €1,000 and €2,000 per week for items such as salaries, salary top-ups, rent and maintenance, among others, during the lockdown.

60% of publicans reveal that government subsidies cover only 20% or less of their costs per month.

For those who have been allowed to reopen under government guidelines in recent months, one in four (40%) report a decline of over 50% in trade compared to the same period last year. A further 40% say that reduced demand and Covid restrictions have resulted in a reduction of over 60% in profits on the same period last year.

15% of pubs have reopened only part time due to the reduced level of business as a result of Covid restrictions.

Irish pubs have and continue to endure the longest lockdown in the EU. Take for example the so called 3,500 “wet” pubs. They were closed from 16 March to 21 September before being advised to close once again on 7 October. Dublin wet pubs have been closed continuously due to public health policy, with no opportunity to trade.

Businesses in the drinks and hospitality industry have proven over the past number of months that they can operate in a controlled and safe environment. Yet, the industry finds itself operating essentially under Level 4 restrictions nationally and Level 5 for Dublin wet pubs, without any certainty as to the strategy or criteria for lockdowns.

According to the research, one in four publicans have accumulated over €20,000 in debt as a result of their business being closed due to Covid restrictions, while 15% of pubs have accumulated over €50,000. One third state that there is a moderate chance that their business will close permanently. More than two thirds (67%) of publicans say that their mental health has suffered as a result of trying to keep their business afloat during the last seven months of restrictions.

Continued impact on employment

To date, half of publicans in Ireland reveal that they already had to let staff go permanently as a result of the Covid-19 pandemic. Over half (52%) fear that they will have to let more staff go in the future. Of those who anticipate that they will have to let more staff go, 80% report that they will have to let more staff go as a result of reduced capacities and demand, while 24% fear that they will have to let more staff go if their business cannot reopen soon.

Three fifths of those surveyed believe that they would struggle to find another job outside of the hospitality industry. 82% of those within the sector feel that the government fails to understand the threat to jobs within the sector, particularly among young workers – a report published by DIGI in September found that 36,300 jobs among the 15-24 age group were at risk in the sector without additional supports.

A lack of government understanding 

A total of 91% of publicans believe that the government has not provided any significant support for the industry so far and that more could have been done. A large majority (90%) believe that the government does not understand the full magnitude of the challenges facing pubs, restaurants, and hotels, which are operating with less demand and capacity.

Furthermore, over three fifths (69%) believe that it is unfair that some wet pubs are still closed, with a further 62% believing that the extended restrictions on pubs serving food and restaurants (outdoor dining) are unfair.

Economic report

A recent report by DCU Economist Anthony Foley ‘Impact of Initial Covid-19 Support Package, July Jobs Stimulus and August Package on the Hospitality Sector’ examines the impact of the Government’s Covid-19 enterprise support package on the hospitality sector which includes hotels, public houses and restaurants. Among the findings of the report are:

  • The Covid-19 economic support packages were not designed to cope with the current pattern of additional and regular disruptions (Government’s Living with Covid-19 Framework), which could be of both short and long durations
  • Payment of PUP to the owner of a closed pub supports the personal income of the publican but does nothing for the payment of continuing fixed costs
  • With regard the VAT reduction announced in the July Stimulus, the report concludes that for each €1,000 of alcohol sales per week, this Vat reduction generates an additional income of only €16.26 weekly for the publican, restaurant owner or hotel owner
  • The existence of a large part of the sector is at risk in the short term. The permanent demise of a large section of the sector should be avoided in the interest of medium and long term economic and employment recovery as the hospitality sector can regenerate the many thousands of jobs that it generated pre-Covid-19
  • There should be consideration of different rates of support per sector depending on degree of negative impact of Covid-19

Liam Reid, Chair of the Drinks Industry Group of Ireland said:

“The impact of the Covid-19 lockdown on the drinks and hospitality sector in Ireland continues to be severe. As the entire country is placed on Level 3, the drinks and hospitality industry is effectively operating under Level 4 restrictions and Dublin ‘wet’ pubs under Level 5. With further restrictions an inevitability, coupled with a lack of a coherent strategy or any certainty, the sector requires a direct response and targeted support measures.

“Our survey of publicans shows plainly that there have been very serious financial implications for those publicans who have fought to protect their business throughout the pandemic. This has led to massive personal strain: more than two thirds of publicans say that their mental health as suffered as a result of the Covid-19 restrictions.

“Now is the time for the government to act. They simply cannot delay any longer. Ireland’s drinks and hospitality industry has suffered through the longest lockdown in the EU. In order to recover, we need long-term, practical and targeted supports that will truly make a difference.

“Ahead of next week’s Budget, the Drinks Industry Group of Ireland is calling on the government to give due consideration to the current constraints that exist within the drinks and hospitality sector and to consider how measures such as a 15% reduction in excise tax, which is the second highest in the EU, can help to create a more pro-business environment for the industry.

“While the physical image of businesses with their doors closed for months on end can help to generate sympathy and compassion, it’s not until you see statistics like these that you fully understand what those in the sector have endured for the past seven months.”

Concluding commentary in a recent report with regard the impact of Covid-19 on the drinks and hospitality industry DCU Economist, Anthony Foley said:

‘This situation will continue well into 2021. The new “new normal” is stop start. Even a phrase such as “the restart grant” is no longer appropriate as there may be several restarts over the next year. Changes in the restart grant are an attempt to reflect this but a more definite systematic approach is needed. Even when open for business, the continuing public health measures mean that the hospitality sector is operating with a fundamentally worsened business model.”

END