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Drinks and hospitality body says Boris Johnson in Number 10 could lead to “recession-type” decline in the sector, particularly in rural Ireland

Drinks Industry Group of Ireland (DIGI) calls on Government to reduce Ireland’s alcohol excise tax which is the second highest in the EU to help businesses cope with rising costs.

• Ireland has the second-highest overall excise tax in the EU, despite it being home to some of the world’s biggest and most beloved drinks brands
• DIGI recommends Government reduces excise tax on alcohol by 15% over the next two years
• British tourism already on decline in Ireland; further slowdown in commercial activity and currency fluctuation could lead to job losses and business closures, particularly in rural Ireland
• Rosemary Garth, DIGI: “The Government must do everything in its power to reduce the grave harm that a no-deal Brexit would have on thousands of businesses and more than a hundred thousand jobs.”

As the Tory leadership race draws to its close, the Drinks Industry Group of Ireland (DIGI) has warned that a no-deal Brexit, which has not been ruled out by prime ministerial frontrunner Boris Johnson, could have a “recession-type” effect on the drinks and hospitality sector, particularly in rural Ireland.

On multiple occasions, Mr Johnson has said that the UK’s EU withdrawal may take place on or before 31 October without a deal, in which case the UK and EU will have to agree a separate bilateral trade deal, a process that could take many years.

For Ireland, this could have disastrous ramifications, particularly for the drinks and hospitality businesses that depend on easy, tariff-free access to the UK market and a stable sterling.

In advance of this scenario, and to give drinks and hospitality businesses the resources necessary to protect themselves against the worst elements of a no-deal Brexit, DIGI has urged the Government to reduce excise tax on alcohol by 15% over two Budgets, with a 7.5% reduction in Budget 2020 and a further 7.5% reduction in Budget 2021.

A sector at risk

According to DIGI’s latest report, Building a Sustainable Drinks and Hospitality Sector, which includes a survey of more than 500 DIGI members, including rural publicans and restauranteurs, 57% of Irish pubs and a further 44% of Irish restaurants rely on the UK as their main tourism market. However, CSO figures from May this year show that trips to Ireland by British travelers have declined by 4.5% year-on-year.

Compounding Brexit issues is Ireland’s punitively high alcohol excise tax. Ireland has the second-highest overall alcohol excise tax in the EU; the highest excise tax on wine; the second-highest excise tax on beer; and the third highest on spirits.

71% of publicans, according to DIGI’s survey, say Ireland’s high alcohol excise tax has negatively impacted their business in the last 12 months. Over a third (37%) of off-licences believe they will close in the next 10 years, and 10% of rural publicans say they will let staff go in 2019 due to rising business costs.

On a macro scale, a slowdown in commercial activity or a spate of job losses and business closures will have serious consequences, particularly in rural Ireland where the majority of drinks and hospitality sector employment is located.

The drinks industry directly and indirectly employs 90,000 in pubs, restaurants, breweries, distilleries, off-licences and other supporting businesses around the country. The wider hospitality sector employs over 175,000 people, or nearly 8% of all Irish workers, and generates €1.4 billion in exports per annum.

Comment

Speaking today, Rosemary Garth, Chair of DIGI and Director of Communications and Corporate Affairs at Irish Distillers, said:

“In just a few short years, the Irish drinks and hospitality sector has experienced immense growth. Irish whiskey and beer are undergoing a global renaissance, and Irish pubs and restaurants remain a fixture on overseas tourists’ travel itineraries.

“That could change with Boris Johnson in Number 10. His election would greatly increase the chance of a no-deal Brexit, which, by extension, would jeopardise the long-term growth prospects of Irish drinks and hospitality businesses that depend on stable British tourism and exports markets.

“A large-scale and long-term reduction in visitor numbers from the UK would have dire ‘recession-type’ effects on the drinks and hospitality sector, particularly in rural Ireland, and lead to job losses and business closures.

“Given the drinks and hospitality sector’s massive contribution not just to the Irish economy but Ireland as a tourism brand, our Government must do everything in its power to reduce the grave harm that a no-deal Brexit would have on thousands of businesses and more than a hundred thousand jobs.

“By incrementally reducing excise tax on alcohol in Budget 2020 and Budget 2021, businesses, particularly the most vulnerable in rural Ireland, will have more available funds to weather the toughest moments of a no-deal Brexit, and the ability to continually invest in job creation, commercial expansion, and product and service innovation.”