€2k a week: fixed costs for closed pubs

Nine in 10 publicans 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 as a result of Covid-19 restrictions, according to new research from the Drinks Industry Group of Ireland.

 

The research, conducted among 1,085 publicans in Ireland last week, reveals that while generating no revenue during lockdown, 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 etc.

For 60% of publicans, government subsidies cover only 20% or less of their monthly costs.

82% of those within the sector feel that the government has failed to understand the threat to jobs within the sector, particularly among young workers.

To date, half of the publicans surveyed reveal that they’ve already had to let staff go permanently as a result of the Covid-19 pandemic and over half (52%) fear that they’ll have to let more staff go in the future.

Of those who anticipate letting more staff go, 80% report that they’ll have to let more staff go as a result of reduced capacities and demand.

24% fear that they’ll have to let more staff go if their business cannot reopen soon and 15% of pubs have reopened only part-time due to the reduced level of business as a result of Covid restrictions.

Three-fifths of those surveyed believe that they’d struggle to find another job outside the hospitality industry.

For those who’ve 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.

 

Burgeoning debts

According to the research, one in four publicans now find themselves over €20,000 in debt as a result of their business being closed due to Covid restrictions, while 15% of pubs have accumulated debt of over €50,000.

One-third state that there’s a moderate chance that their business will close permanently and more than two-thirds (67%) say that their mental health has suffered as a result of trying to keep their business afloat during the last seven months of restrictions.

 

A lack of government understanding 

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, states the DIGI.

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.

Furthermore, over three-fifths (69%) believe that it’s 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.

“The impact of the Covid-19 lockdown on the drinks and hospitality sector in Ireland continues to be severe,” said DIGI Chair Liam Reid, “It’s not until you see statistics like these that you fully understand what the sector has endured for the past seven months.

“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’ve 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 has 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 the Budget the DIGI 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, the second-highest in the EU, can help to create a more pro-business environment for the industry.

“This situation will continue well into 2021,” said DCU Economist Anthony Foley’s concluding commentary in a recent report with regard the impact of Covid-19 on the drinks and hospitality industry, “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.”

 

Economic report

A recent report by DCU Economist Anthony Foley entitled,  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 to 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.

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