Reactions from the business community to Budget 2023

Business, Irish News | Wed 28 Sep | Author – Business & Finance

The business community responds to how money will be raised and spent in 2023, according to the new Budget announced by Minister for Finance, Paschal Donohoe, and Minister for Public Expenditure, Michael McGrath


Hoteliers

Hotels and Guesthouses across the country have broadly welcomed the energy supports for businesses announced in Budget 2023 but are seeking an amendment to criteria to ensure that significant tourism employers can receive appropriate supports in the face of skyrocketing business costs and a deteriorating economic environment. The sector has also said that they will continue to advocate for the retention of the 9% VAT rate beyond February 2023 as it is a critical measure to ensure the long-term sustainable growth of Ireland’s largest indigenous export industry.

Denyse Campbell, President of the Irish Hotels Federation, said that while elements of the Budget will help hoteliers, the sector feels that the Government have missed an opportunity to continue support for employment recovery and growth in tourism.

This increase will make Ireland’s tourism VAT rate the second highest in the European Union

“The Temporary Business Energy Support Scheme (TBESS) is broadly welcome for hoteliers that have been hit by shocking energy price increases of over 400% in electricity and 300% in gas prices since 2019, in addition to a severe rise in day-to-day operational costs such as linen (29%), food (22%) and beverages (12%) in the last 12 months.* However, we are seeking an amendment to criteria for significant employers so that they can receive appropriate supports.”

Campbell said that the tourism sector will be disappointed with the Government’s decision to increase the Tourism 9% VAT rate by 50% from March 1st next year and that the Government has not fully recognised the importance of the tourism industry to every town and every county in Ireland.

“This increase will make Ireland’s tourism VAT rate the second highest in the European Union, and far above other European countries where tourism is a significant part of their economies, such as Portugal (6% Tourism VAT), Turkey (8%) and Malta (7%)**.

“Hoteliers and the tourism industry believe that 9% is the right VAT rate for long-term sustainable growth. Our industry has made great progress on restoring over 230,000 tourism jobs since the depths of the pandemic. We will continue to advocate for the retention of the 9% VAT rate beyond March 2023 and make the case for a labour-intensive industry that employs people in all parts of Ireland, including 70% outside Dublin,” Ms Campbell concluded.

Dublin Chamber

Dublin Chamber, representing 1,300 firms across the Greater Dublin Area, welcomed measures to improve the tight labour market in the region, including the near trebling of the universal National Childcare Scheme and measures to boost housing and penalise vacant property. 

“The CSO estimate that there are over 58,000 women who could potentially be in a job, but are not in the labour force,” said Aebhric McGibney, Director of Public & International Affairs. “We believe that the boost to cut the cost of childcare will help bring these people into the many employment opportunities firms have an offer but are currently unable to fill in a tight labour market.”

While it is important to support businesses to manage higher energy bills, through direct Government intervention this winter, Government needs to tackle the root causes of rising energy costs

McGibney continued: “While there is a number ‘big bang’ cost of living measures in this budget, it will make tangible progress on a broad range of challenges facing Dublin. The continued investment in housing, transport, training and education are particularly welcome. We also welcome the Vacant Property Tax and the progress made on the Residential Zoned Land Tax to penalise vacant sites that can be used for accommodation.

“On the enterprise front, the reforms to KEEP, the share option scheme for employees of unquoted SMEs, will help boost liquidity for those allocated shares and the acceleration of R&D tax credits for SMEs will boost the cash flow of these firms and help stimulate further investment in research and development. However, more could have been done here to boost the competitiveness of Irish enterprise versus the UK and support investment in small firms.”

“While it is important to support businesses to manage higher energy bills, through direct Government intervention this winter, Government needs to tackle the root causes of rising energy costs, helping business to make a transition to a lower carbon or energy efficient model to ensure that energy costs remain manageable in the longer term.”

Savills Ireland

Property advisor, Savills Ireland welcomed the extension of the Help-to-Buy and Residential Development Stamp Duty Refund Schemes announced in Budget 2023. However, overall, Savills expressed its disappointment at the lack of measures in the Budget to foster the supply of housing.

Clarie Neary, Director of Residential Lettings and Management at Savills Ireland commented: “There is a significant undersupply of properties available to rent in Ireland – stemming from an exodus of private landlords from the market. While the increase of tax relief on pre-letting expenses is to be welcomed, it’s not enough to incentivise landlords to stay in, or return to the market and boost supply.”

We’re in the midst of a housing crisis at a time when inflation, construction costs and a scarcity of development finance are making residential development unviable.

John Swarbrigg, Development Director at Savills Ireland commented: “We’re in the midst of a housing crisis at a time when inflation, construction costs and a scarcity of development finance are making residential development unviable. To add to that, our planning system requires a mix of unit types in most locations, some of which are extremely challenging to deliver from a viability perspective, apartments and duplex units primarily, particularly in locations outside of the major cities.

This was a missed opportunity by the government to introduce measures that would boost the development of desperately-needed residential supply. For example, while it may not be politically popular, a reduction in the 13.5% VAT rate on the construction of certain residential unit types would have a positive impact on delivery.” 

David Browne, Director & Head of New Homes at Savills Ireland welcomed the Help-to-Buy scheme: “The delivery of new homes continues to fall short of what is required – and the disruption brought by the pandemic – in addition to rising construction costs and inflation – has compounded this. Therefore, nowhere near enough people have benefitted from Help-to-Buy and we welcome its extension.”

Catherine McAuliffe, Director of Residential at Savills Cork also welcomed the extension of Help-to-Buy: “The extension of Help-to-Buy, coupled with the recently introduced First Home Scheme, will help to ensure housing is more affordable to a larger cohort of first time buyers who have been disappointed by the lack of stock and the increase of prices over the last few years.”

The British Irish Chamber of Commerce

Speaking after budget was announced, Paul Lynam, Director of Policy and Deputy Director General at the British Irish Chamber of Commerce, said: “The British Irish Chamber of Commerce welcomes today’s Budget, which specifically addresses the current cost of living crisis for households and provides much needed supports for businesses in this extreme inflationary environment.

“In a highly uncertain global landscape, Budget 2023 correctly takes a cautious approach by replenishing the ‘Rainy Day Fund’. While the fund is far from enough given the volatility of corporation tax, the move will allow the country to think long term and prepare for future risks and liabilities like interruptions to trade and supply chain issues.

“The Chamber also warmly welcomes the €238m allocated from the Brexit Adjustment Reserve to the agri-food sector aimed at supporting our farmers as they continue to deal with some of the challenges caused by Brexit and the impact of rising feed and fertiliser prices. This is something which our members have long requested. The agri-food sector is one of Ireland’s most important industries and it is vital the Government continues to protect it.

In a highly uncertain global landscape, Budget 2023 correctly takes a cautious approach by replenishing the ‘Rainy Day Fund’.

“Despite these positive aspects, the Chamber remains concerned over the lack of some important measures aimed at keeping Ireland competitive in an increasingly challenging global stage. Given the volatility of the sterling, additional supports should have been announced for exporters, who heavily rely on the UK market for business. Ireland exported €18.1bn worth of goods to the UK in 2021 alone.

“While the shift in the entry rate for the top rate of tax to €40,000 is a welcome move, it is still not enough to make Ireland a location of choice for young talent, especially amongst higher income earners.

“Above all, ahead of the imminent debate in the UK over the Northern Ireland Protocol Bill, Budget 2023 fails support critical areas like trade diversification and greater collaboration between Ireland and the UK.”


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