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Industry Reacts to Budget 2020

There has been a mix of support and criticism from the food and drinks sector for Minister Paschal Donohoe’s budget, which was delivered on Tuesday 8th October.

Minister Donohoe delivered a budget of ‘Absolutely no surprises’, as the ‘Shadow of Brexit’ looms large over the Government purse.

Crucially, a €1.2bn Brexit fund was announced, to be enacted in the case of a no-deal Brexit scenario. In the event of a hard Brexit, the Exchequer is anticipating a GDP deficit of between 0.5% and 1.5% in 2020.

If there is a no-deal Brexit, €650m will be provided for agriculture, enterprise and tourism. Of this, €110m will be be provided through the Department of Agriculture, Food and the Marine – €85m for beef farmers, and €14m for fisheries. €40m will be used to support the tourism sector.

The €40m funding will allow for a focus on regions most exposed to a hard Brexit such as the border counties; a targeted advertising campaign for the British market via Tourism Ireland; promotions in other key markets such as North America; and for Fáilte Ireland to support tourism businesses through its Brexit Response Programme.

Adrian Cummins, Chief Executive of the Restaurants Association of Ireland, was quick to point out that the sector is already facing hardships and that this was not recognised in the budget.

Mr. Cummins said: “This was the incorrect decision by Government. The writing was on the wall, CSO figures showed trips to Ireland decreased by 0.5% in July 2019 and decreased by 1.0% in August 2019. The sector needed support to lower the cost of doing business. This Government has demonstrated that Ireland is no place for small business.”

The Irish Hotels Federation (IHF) has criticised the Government for maintaining the hospitality VAT rate at 13.5%. Michael Lennon, President of the IHF, said the VAT rate has harmed Ireland’s international competitveness and the ability of hotels to reinvest in their business.

Mr Lennon said: “Budget 2020 is heralded as a Budget for Brexit. Despite the serious challenges facing tourism, Government has failed to recognise the importance of competitiveness and its role in the ever-increasing cost of doing business in Ireland. This is a missed opportunity to rebalance the tax take from tourism at a time when economic indicators provide significant warning of a change in outlook.”

According to recent research by the IHF, 57% of hotels have seen a fall in overall business levels this year. The UK market is particularly challenging, with 78% of hotels having seen a fall-off in business from Great Britain and 60% reporting a decrease in business from Northern Ireland. 73% say they are now re-examining investment plans and taking a more cautious approach for next year.

Jonathan McDade, Head of Drinks Ireland | Beer, welcomed the tax break qualifying production threshold for microbreweries being increased by 10,000 hectolitres to 50,000.

Mr. McDade said: “This means that a microbrewer can get an excise rate relief of 50% if it produces less than 50,000 hectolitres of beer per annum. This includes a ceiling of 30,000 hectolitres for domestic sale. This measure will assist microbreweries with ambitious expansion plans, particularly those looking to increase exports, and could enable international beer consumers to enjoy more craft beer from the Irish market.”

Vincent McGovern, Head of Drinks Ireland | Spirits, which represents spirits producers in Ireland, has welcomed the changes to the Employment and Investment Incentive (EII) Scheme.

Mr. McGovern said: “These changes, which result in the full income tax relief being provided in the year of investment, the annual investment limit for the incentive being increased to €250,000, and in particular providing for a new €500,000 annual investment limit for those investors who are prepared to invest in the scheme for ten years or more, are welcome.

“Drinks Ireland | Spirits believes that these changes will help smaller distilleries as they recognise the fact that they are not the same as other small companies and that the practicalities of setting up a whiskey distillery are different.”

John McGrane, Director General of the British Irish Chamber of Commerce, said: “The approach taken by the Government to plan for a ‘no deal’ Brexit is a prudent one that will best help protect business and trade in the uncertain days and weeks ahead.

“The British Irish Chamber of Commerce specifically welcomes the establishment of the Brexit Contingency Fund. The Chamber has long advocated for the setting up of such a fund to help protect those businesses most vulnerable to a ‘no deal’ Brexit. The allocation of €1.2bn to support these businesses will be vital should a disorderly Brexit come to pass.

“Vigilance will be required by Government to meet the challenges ahead, particularly to ensure the survival of many of our SMEs and agri-food sector,” he continued.

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