Irish hospitality insolvencies fall by almost a quarter as VAT cut takes effect

Company failures in the Republic of Ireland’s hospitality sector have dropped by nearly a quarter this year, new insolvency figures show, with the Government’s reduced VAT rate for food service seen as a possible factor.

PwC Ireland’s latest insolvency barometer records 86 hospitality insolvencies in the nine months to the end of September. That is 23% fewer than in the same period of 2025 and well short of the roughly 35 a quarter the sector has averaged since the start of 2023.

PwC described the trend as a sign of continued stabilisation, adding that the Government’s VAT reduction may have helped. From 1 July, the rate on restaurant and catering services fell from 13.5% to 9%.

The firm’s earlier data shows, however, that hospitality failures were already easing in the six months to the end of June, before the lower rate came into force.

Costly measure

The reduction was confirmed in Budget 2026 following sustained lobbying by industry bodies. It is forecast to cost the Exchequer €232m this year and €681m in 2027, a combined €913m over 18 months.

The Irish Fiscal Advisory Council has said that sum would alternatively fund 8,846 nurses or 6,053 teachers, or widen the standard-rate income tax band by €2,328. The VAT change made up 17% of last year’s Budget tax package, the largest single measure announced.

Wider picture

Across the economy, PwC said corporate insolvency levels stayed steady and well under historic norms. There were 204 failures in the third quarter, taking the nine-month total to 648, against 633 a year earlier. The long-term average since 2005 is about 250 a quarter.

By the end of September, the rate stood at 27 insolvencies per 10,000 businesses in the Republic, compared with a 21-year average of 49.

Not every sector fared as well. Retail insolvencies rose 25% year on year over the nine months, while construction failures were up 26%.

Ken Tyrrell, business recovery partner at PwC Ireland, attributed the retail rise to structural pressures, among them changing consumer habits, while higher costs were weighing particularly on contractors.

He said the low overall figures suggested recent Government support had helped keep failures down, and added that PwC expects Budget 2027 to continue backing the competitiveness of Irish SMEs.