The Restaurants Association of Ireland (RAI) has issued a strong warning to Government ahead of Budget 2026
The Restaurants Association of Ireland (RAI) has issued a strong warning to Government ahead of Budget 2026: it must fulfil its promise to reinstate the 9% VAT rate for food-led hospitality businesses or face the consequences of further closures, job losses, and long-term damage to Ireland’s tourism economy, particularly in rural towns and villages.
This week, the Restaurants Association of Ireland launched its Pre-Budget Submission, outlining urgent policy measures needed to safeguard thousands of restaurants, cafés and gastropubs across Ireland. It calls on the Government to take immediate action to prevent further decline in one of Ireland’s most important indigenous sectors.
At 13.5%, Ireland has one of the highest VAT rates on food services in the EU. More than half of EU countries apply reduced VAT rates to hospitality, recognising the sector’s unique social and economic contribution.
The estimated €545 million cost of restoring the 9% VAT rate should be viewed as an investment, not a loss. Independent analysis by leading economist Jim Power shows that the closure of just 500 restaurants could result in a €680 million hit to the wider economy when job losses, tax revenue decline, and increased welfare dependency are considered.
The impact is already being felt. A 2024 report by renowned economist Anthony Foley projected that a 10% drop in tourism numbers, linked to reduced food service availability, could result in a worst-case scenario of €1.045 billion in lost tourism spending. That scenario is possibly becoming reality: CSO data shows a 17% fall in tourism numbers in the first five months of 2025.
Despite spiralling costs, menu prices in the sector have risen only modestly by just 3.3% in the past year and 29.8% over five years which is well below actual cost inflation. Businesses are absorbing massive increases because they know customers can’t afford more. One example: while coffee commodity prices have risen by 156% since October 2023, consumers haven’t seen anything close to that reflected on menus.
Costs have soared
According to the Restaurants Association of Ireland, Cost of Doing Business Survey, input costs between 2022 and 2025 have soared:
- · Fruit & Vegetables: +50%
- · Chocolate: +157%
- · Chicken: +35%
- · Beef: +95%
- · Pork: +35%
- · Gas Prices: +58%
- · Electricity Costs: +96%
Key asks in Budget 2026
In the face of these pressures, the Restaurants Association of Ireland is urging Government to act. Key asks in Budget 2026 include:
- ·Reinstatement of the 9% VAT rate for food-led hospitality businesses
- ·Ensuring future increases to the National Minimum Wage are aligned with inflation
- ·Halving the Employer PRSI rate for one year to relieve cost pressures
- ·Support for Food Tourism promotion and the creation of a Food Tourism Strategy, backed by €400,000 in initial funding
- ·Urgent insurance reform to address unaffordable liability premiums
- ·Reforms to Benefit-in-Kind (BIK), including exemptions for employer-provided accommodation and small staff events
Over 200 restaurants have already closed in 2025. The average Irish food-led business employs 22 people and supports a broader economy that sustains more than 220,000 jobs, 70% of them outside Dublin. With consumer confidence weakening and tourist footfall declining, the Restaurants Association of Ireland warns the sector cannot withstand another year of government inaction.
Adrian Cummins, CEO of the Restaurants Association of Ireland, said:
“Budget 2026 must be a turning point. Temporary measures are not enough, we need a pro-SME, pro-hospitality budget that supports survival now and enables long-term growth.”
“Restaurants are more than businesses; they’re anchors of communities, tourism and culture. But high VAT, soaring input costs, and government-induced pressures are pushing many to the brink.”
“Bringing back the 9% VAT rate, as promised by Government, is essential. Tánaiste Simon Harris called it a solemn commitment, now it’s time to deliver.”
“If we lose our food-led businesses, we lose not just jobs and investment, but the very heart of Irish hospitality. We need action, not more announcements.”
“The data is clear: businesses have absorbed wave after wave of cost increases to protect staff and customers. But they can’t take any more hits. Without urgent action in Budget 2026, closures will escalate.”dal Award at the recent Irish Hotel Awards.
