However, labour cost increases in January will cripple many businesses before 9% VAT arrives in July.
The Restaurants Association of Ireland today warmly welcomes the Government’s decision to reinstate the 9% VAT rate for food-led hospitality businesses, announced as part of Budget 2026. This is a vital recognition of the economic and cultural importance of Ireland’s restaurant and hospitality sector.
However, the Association also issues a strong warning of the looming cost burdens in early 2026, many hospitality businesses will struggle to survive the first half of 2026 unless action is taken to offset rising labour costs ahead of the VAT reduction in July.
From January 2026, hospitality businesses will face nearly 5%in an increase in the National Minimum Wage alongside the introduction of pension auto-enrolment. These significant increases in labour costs come at a time when the sector is struggling with rising food prices, energy costs and the remaining pandemic-related debt.
Adrian Cummins, CEO of the Restaurants Association of Ireland said:
“The return of the 9% VAT rate is a welcome and long-fought victory for our industry. It will play a key role in safeguarding jobs, supporting SMEs, and maintaining Ireland’s global reputation for hospitality and food tourism. This could be the difference between some businesses continuing to offer employment and importantly, a revenue stream to the exchequer.”
“We thank Minister Peter Burke whose support and understanding of the sector have been critical in securing this outcome. We also wish to recognise the support of Taoiseach Micheál Martin, Tánaiste Simon Harris, Minister for Finance Paschal Donohoe, Minister for Public Expenditure Jack Chambers and governmental Oireachtas members, who have acknowledged the challenges our industry faces and advocated on our behalf.”
“But we must be clear, July 2026 is too far away for many businesses already on the brink. The combined impact of a significant minimum wage increase and the rollout of pension auto-enrolment in January will place unbearable strain on food-led hospitality businesses, many of which are small, family-run enterprises operating on razor-thin margins.”
“Ireland’s restaurant and hospitality sector is one of the largest employers in the country, with over 220,000 people working in the industry, the vast majority in small and medium-sized enterprises that are central to local economies, particularly in rural Ireland. With 99.6% of the 20,213 hospitality businesses in the sector being SMEs, they simply do not have the capacity to absorb the planned cost increases in January 2026.”
Acknowledging Government Support
The Restaurants Association of Ireland extends its sincere thanks and appreciation to Minister for Enterprise, Tourism and Employment Peter Burke, whose leadership and engagement with the sector have been critical in securing this outcome.
We also wish to recognise the support of Taoiseach Micheál Martin, Tánaiste Simon Harris, Minister for Finance Paschal Donohoe, Minister for Public Expenditure Jack Chambers and members of Fianna Fáil, Fine Gael and Independent TDs, who have acknowledged the challenges our industry faces and advocated on our behalf.
The Restaurants Association of Ireland further thanks opposition parties and Oireachtas members who stood with the hospitality sector in pressing for the reinstatement of the reduced VAT rate.
The Restaurants Association of Ireland remains ready to continue to work closely with the government to ensure that the minimum wage increases and pension auto enrolment does not result in business closures, job losses and a diminished hospitality offering across the country.
