“Crippling” wage hikes could leave some towns in Ireland without restaurants, a hotelier has claimed.

At the start of the year, the minimum wage increased to €12.70 per hour and the Government has told businesses to expect further increases in the years ahead.

In 2022, then-Tánaiste Leo Varadkar announced the minimum wage would be replaced with a living wage by 2026 - meaning the lowest paid staff in Ireland will earn around 60% of the hourly median wage.

Speaking to Breakfast Business, hotelier Lorraine Sweeney said the increase would see labour costs increasing by nearly a fifth at some businesses.

“The 19% is going to come just from the increases in the minimum wage going up to the living wage,” she said.

“That’s just 19% in the cost of staff; there’s other cost increases [as well], like the food costs are going up fast and utilities.

“Really, this decision the Government made to increase the minimum wage to the living wage is done with absolutely no consultation with business.

“No consideration has been given as to what the knock-on effects [will be] particularly on hospitality business where labour costs are extremely high.”

Waiter with drinks.

The Restaurants Association of Ireland has said 50 restaurants, cafés and other food-led businesses shut in one month alone last year.

If the wage increase goes ahead, Ms Sweeney believes more businesses will be forced to shut their doors.

“The staff might end up without a job and tens of cities around Ireland might end up without restaurants as a result of it,” she said.

“This is happening, they’re closing in their hundreds; it’s only the start.

“It’s going to have a knock-on effect on the tourism sector because people come to Ireland… and they’re going to find the restaurants are closed.”

Outdoor dining in Dublin. Photo: Sam Boal/RollingNews.ie

Ms Sweeney said the proposed increases are “unsustainable” and restaurants will be forced to charge higher prices or serve smaller portions to balance the books.

One thing she believes would help is if the Government reversed its decision to increase VAT on hospitality from 9% to 13.5%.

“That has been an absolute blow to the industry,” she said.

“What they should have done actually is met the industry halfway and maybe bring the VAT down on restaurants and cafes.”

Taoiseach Leo Varadkar has told the Fine Gael Parliamentary Party it would be possible to cut VAT on restaurants and pubs, while continuing to charge hotels the current 13.5% rate.

Main image: A restaurant in County Limerick.