A survey for the Restaurants Association of Ireland indicates that revenues for the year will be down substantially on 2019 figures and will keep falling through 2021.

The survey was carried out by accountancy practice Crowe, and it shows that revenue for July to September was down 37% on 2019. Q4 revenue is expected to decline by a further 41%.

The survey of 127 members of the association also showed that the average cost of reopening after lockdown was €17,200 .

The survey was completed when businesses were operating under Level 2 restrictions, allowing in-house dining across a broad spectrum of food businesses.

“With the industry now facing into another period of increased restrictions, these businesses are set to lose an additional three weeks trade in 2020 on top of the three months lost by restaurants that were fully closed from April to June. More costs will have to be incurred to deal with the current closure and the next reopening,” said RAI chief executive Adrian Cummins.

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The effects are expected to continue well into next year, with four out of five restaurant owners expecting revenue to be down for at least 12 months and a further 20% expecting the effects to last for more than two years.

The Crowe report finds that with half of revenue in 2019 derived from international visitors, restaurants will find it difficult to recover until international travel restrictions are fully lifted. Without additional facilities, two thirds of restaurants will run out of cash in three months.

One third of RAI members who responded to the survey have taken full payment breaks on loans, 13% are on interest only and half of respondents said they annot afford to repay loan principal.

However, more than 90% availed of both a Restart Grant and the wage subsidy scheme, 80% availed of  local authority rates waivers, while 60% have availed of deferment of VAT and PAYE.

Up to Wednesday’s Level 3 restrictions going nationwide, respondents had managed to bring back 71% of permanent staff and 55% of casual staff on to their payroll.

Given the uncertain economic and trading environment, there is a reluctance to take on more borrowings, with less than 20% saying they availed of SCBI support and just 15% availing of Microfinance Ireland loans.

However, more than 90% availed of both a Restart Grant and the wage subsidy scheme, 80% availed of  local authority rate waivers, while 60% have availed of deferment of VAT and PAYE.

Up to Wednesday’s restrictions, respondents had managed to bring back 71% of permanent staff and 55% of casual staff on to their payroll.

Among the responding restaurants, four out of ten have landlords who have facilitated rent reductions, mostly for a six months period. Where rent reduction was secured, the discount ranged from 40% to 100%.  Amongst the landlords who did not facilitate rent reductions, 23% wrote off rent while 29% deferred rent for the closure period.

When asked to rank the importance of varying supports to the sector, a waiver of commercial rates for 2020 was the number one preference followed by a reduction of the 13.5% VAT rate.

Tax Warehousing

Aiden Murphy (pictured), partner at Crowe, commented: “There is also now a strong argument that the Covid-era tax warehousing scheme for hospitality businesses be opened until end of October 2020 rather than end of August 2020 to allow businesses file their September payroll tax return defer the liability to after November 2021 and be compliant so their first EWSS claim for September is made by Revenue.

“This could be brought in by new guidance by Revenue. This would provide a payment break when cashflow is stretched to breaking point for many businesses. We know from the last recession that it is not the fact that a business is loss making that forces it to close but the fact that it just cannot pay the next bill.”

Murphy added: “The survey indicates the indefatigable spirit of operators in the restaurant and hospitality sector as the number of businesses that were able to re-open after three months of closure is remarkable. This feat was only achievable through a solidarity of purpose supported by bovernment with the TWSS and rates initiative, banks through easily accessed payment breaks on loans and the forbearance of landlords.

“This of course is underpinned by the hard work of business owners to re-establish as lean a business as possible and trade to its potential given the capacity constraints and uncertainty as to patterns of demand. Several respondents noted they were working double the hours they normally did to ensure their business survives.

“As 2021 will only at best see a modest let up in business pressure points, all of the measures which when introduced were for obvious reasons temporary in their design will need be replicated for all of next year if we are to carry on with the providing of the hand up to save these businesses and the jobs they provide.”