Hospitality sector is the first to feel the economic brunt of COVID-19, it requires a recovery plan.
Report published 20th March 2020
The Hospitality sector is a key component of the Irish economy worth up to €7.6bn and employing 180,000 people.
The last week has seen an unprecedented level of business closures (albeit we hope temporarily) and corresponding layoffs of an enormous scale. While the safety net of social welfare is welcome, in this paper we argue that the State should step in now and subvent employees to ensure that employment is protected.
We also highlight that even with this step, there will be a critical need for working capital support to get the business back on its feet post the COVID-19 crisis.
We argue that a level of income continuance and working capital support would ensure that the industry, which not only provides a valuable direct economic benefit but also contributes to tourism and the overall brand of Ireland, survives.
We define Income Continuance as a scheme where the state would subvent employers to pay staff under strictly limited conditions:
• 75% of home pay;
• Benefit capped at the equivalent of an annual salary of €50,000 per annum and;
• Strictly limited to one week after the end of social distancing
Working capital has not been fully costed in this draft but we present a worked example based on a typical bar with a significant food trade. It shows that, unsupported, a proprietor would need to be able to sustain 62 weeks of negative cash before returning to the black.
The knock on impact of allowing this industry to be severely damaged to the economy and taxation is huge. There is also a significant additional impact on our social fabric especially given the level of societal disruption being caused by the current crisis.
Hospitality is core to our DNA and goes to the heart of brand Ireland. We recognise that this is a significant action. We can understand that there are clear spill-over impacts into other industry sectors, while we would argue that this may well be appropriate; we have simply highlighted one sector.
We would also posit that in the last economic crisis the state took a number of step by step actions before eventually having to step in and spend €64bn to resolve the crisis.
An income continuance scheme would cost net €2.4m per week for the Hospitality sector. We would argue that bold and early action will ultimately be more positive and impactful.
The hospitality sector (bars, restaurants and hotels) has been hit hard in the past week with most businesses shuttered and staff laid off.
Final data is not yet available but conservatively 100,000 people or over half the sector have already been laid off. To save this sector which provides critical support to the regional economy will require two bold actions by government:
While this report focuses on the hospitality sector, the approach and solutions could well be a template for other industry sectors facing similar challenges.