Carol Nolan (Offaly, Independent) | Oireachtas source

I welcome the debate we are having on this very important matter. Clearly, there is a need to rectify the deficits in law with respect to insolvencies and the protections offered to employees. Indeed, that need is becoming increasingly urgent. We know from reporting on this matter by Credit Connect in January that business insolvencies in Ireland hit the highest level in six years, based on research conducted by PwC. That report also specifically highlighted the fact that insolvencies increased by 16%, although they came in below expectations as the fourth quarter saw a drop-off in company collapses. That said, the total figure for 2024 was 852, which was, as noted, below PwC's forecast that insolvency numbers would breach the 900 mark last year. Most alarmingly, however, the report found the retail and hospitality sectors accounted for 40% of all insolvencies. This collapse and the folding of such businesses is an issue I have been highlighting for some time with respect to my constituency of Offaly. In fact, last year, I engaged with then Minister for Finance, Michael McGrath, urging him to adopt maximum flexibility with respect to 1,530 businesses in what was then the Laois-Offaly constituency which had liabilities of €23 million warehoused as part of the tax debt warehousing scheme introduced for businesses following the pandemic. I pointed out at the time that were there 755 businesses in Offaly with tax debts of €11 million, while in Laois there were 775 businesses with €12 million in debt currently being warehoused.

This presented a clear and undeniable case for granting increased latitude to businesses around repayments, given the ongoing nightmare of closure announcements that were falling like confetti when it came to restaurants, cafes and the hospitality sector.

This problem has by no means disappeared. In light of the heightened volatility around tariffs and the EU response to the US, we are probably facing into a period of rapid growth in insolvencies. On the impact on hospitality, I highlight the statement issued by the Restaurants Association of Ireland, RAI, earlier this month in which it referred to the fact that 150 restaurants closed in the first quarter of 2025 due to soaring business costs. This data also revealed the mounting financial pressures restaurants and hospitality businesses right across this State are facing. According to the RAI, the pressure on the sector continues to result in closures, with 65% of respondents reporting a decline in financial performance in 2024 in comparison with previous years. Business owners identified wage increases and escalating operating costs as the most pressing challenges, with many restaurants forced to reduce the number of staff, raise menu prices and seriously question their long-term viability. The survey revealed that payroll costs now account for 39% of turnover. This is a significant increase from just under 32% in 2022. Food costs have also surged, rising from 28% to over 34% of turnover, while insurance and utility bills have climbed by 32.89% and 25.81%, respectively, over the same period. Employment trends reflect the strain, with full-time staff levels dropping by 10% and part-time roles by 7% since 2022.

This Bill is definitely a step in the right direction. However, my main point is that our first priority should be about putting structures and supports in place, be it be through the tax or VAT code, to prevent further insolvencies. I hope the VAT rate will be reduced to 9% for restaurants and hair salons, which are also impacted. Workers need access to their rightfully earned wages if a business becomes insolvent. No one could disagree with that as a fundamental principle.

We must also ensure far more robust protections in line with the Supreme Court ruling in December 2018 that Article 2 of the 2008 EU directive was not correctly transposed.

We must do more in terms of reducing the massive tax and VAT debt that far too many businesses are labouring and, in some cases, collapsing under. This is something we can control. We should respond with all the latitude and constructive engagement we can when it comes to achieving the goal of creating an environment in which local and regional businesses cannot just survive but in which they can thrive and in which jobs are protected. I say this because if employers and businesses are not protected, then obviously this will lead to job losses. I am particularly concerned about this happening in County Offaly, where we have seen far too many small businesses, especially restaurants and cafes, close their doors recently. I hope more supports will be given in the forthcoming budget. Indeed, I am calling for this to happen and for the VAT rate be reduced to 9% for our restaurants, cafes and hair salons.

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