The Hair and Beauty Industry Confederation has told the government that Covid-19 has had a “devastating impact” on the sector and it needs urgent support with reopening and attracting customers.

One of HABIC’s big concerns is the huge increase in black market trading in the sector, with clients migrating to “non-legitimate operators”.

It wants a ‘stay and spend’ type scheme which would apply only to registered, legitimate businesses. “By giving a tax credit to customers, clients would be enticed back to the salons; this would provide support to struggling businesses seeking to rebuild; and it would help divert business away from non-legitimate operators who make no contribution to the Exchequer.”

Economist Jim Power’s report on the sector shows that its contribution to GDP of €2.62 billion in 2019 fell to €1.74 billion last year, when salons were closed for 22 weeks. This year the 9,031 businesses in the sector have already been closed for 17 weeks.

“In 2019 the industry provided 30,800 jobs and 18,480 indirectly,” he said. “These numbers reduced to 27,000 direct jobs and 16,200 indirect jobs in 2020, and are decreasing.”

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HABIC chief executive Margaret O’Rourke Doherty (pictured) commented: “While we recognise public health and safety is the priority, our sector has been disproportionality penalised. Since the outbreak of Covid-19 and from approximately 6.8 million services, there have only been seven outbreaks identified in the sector.

“We have outlined a number of measures that will have the dual impact maintaining a viable sector and at the same time protect taxpayers in the face of a burgeoning black market trade.”

“Our members account for thousands of employees with a significant presence in every town and village in Ireland, who provide an essential service to the community. This is a crucial time for the sector and the communities who we provide our services to. It is essential that we are allowed to properly trade into the future.”

HABIC is seeking the following measures:

1. The 9% VAT rate should become permanent and government should  extend the lower VAT rate to the beauty sector. This would help the legitimate operators compete against the non-legitimate operators and undermine the black economy in beauty and hairdressing services, says HABIC.
2. One of the challenges for the sector will be to attract clients back who have migrated to non-legitimate operators.  A ‘stay and spend’ type scheme should be introduced for registered legitimate businesses but only eight weeks after salons are allowed reopen.
3. The EWSS scheme should remain in place for the hair and beauty sector until at least the end of 2021, and possibly to the middle of 2022, depending on the evolution of restrictions on the sector. As employers must possess valid tax clearance to enter the EWSS and continue to maintain tax clearance for the duration of the scheme, this will further help legitimate businesses compete against non-legitimate businesses.
4. Many closed businesses will be left with a legacy of accumulated rents, commercial rates, tax liabilities, and bank interest costs. If those businesses are to restart and become viable again, it is essential that reliefs are extended to the end of 2021.
5. The sector needs to be given a meaningful once-off grant payment to enable them to reopen in a sustainable way, equivalent to 50% of commercial rates in 2019, subject to a minimum payment of €3,000. HABIC says this is essential due to significant costs of reopening, including further investment in PPE; rapid antigen testing; high fixed and variable costs in running a business under conditions of serious restrictions; and staffing problems.

Power concluded: “COVID-19 has demonstrated the importance of hair and beauty services in Irish life, from a social, economic, and mental health perspective. Following the closure of these businesses in March 2020, and the subsequent varying levels of restrictions, the financial impact on the operators has been very severe, but the impact on the national psyche has been equally severe.”

Power's full report is available here.