The cost of living has impacted hospitality businesses all across the island, and Northern Ireland is no exception. More than a quarter of hospitality businesses in Northern Ireland, in fact, are currently operating at a loss. This comes after April’s rise in the NIC (National Insurance Contributions) to 15% for employers, and a minimum wage increase to £12.21. Here are the factors and issues impacting Northern Irish Hospitality today.
The VAT Rate
Northern Ireland maintains a UK rate of VAT on food and drink, which currently stands at 20%. This is higher than the current VAT rate in the Republic of Ireland: 13%. Some hospitality owners in Northern Ireland fear that this disparity will affect Northern Irish tourism, as the gap puts them at a competitive disadvantage. This gap is also set to widen if the Irish government reduces the hospitality VAT rate to 9%.
Rising Employment Costs
Another challenge for Northern Ireland hospitality, again more expensive than the republic, is the newly-risen rate of NICs. NIC rates for employers in the North have risen to 15%, in line with the UK. This came as a blow for many hospitality businesses who now face much higher employment costs than before. This came alongside a rise in the minimum wage to £12.21.
Issues for Employers
The latest stats from Businesseye.co.uk show that the Northern Irish hospitality scene is struggling to keep up with this mountain of rising costs. Some have turned to staff layoffs and a reduction in their team: 87% of employers are operating below 90% of required capacity, with the majority (55%) operating below 80% capacity. 72% have less than six months of cash reserves, and 21% have no cash reserves at all. 68% of hospitality businesses have increased prices as a means of coping with these rising costs.
Employers believe the solution is a reduced VAT rate for hospitality businesses, and an amendment to April’s changes in the employer NIC rate. Keir Starmer’s newly announced ‘Pride in Place’ programme will also provide some respite, with investment for Northern Ireland’s high streets to be rolled out to local communities.
