Spiralling business costs have piled pressure on Galway’s retail and hospitality sectors fuelling fears of redundancies and more closures of local restaurants, cafes, and shops.

Retail Excellence Ireland (REI) has warned that its members will struggle to absorb soaring costs from an ‘avalanche of new policy measures’ introduced by Government without supports to offset the additional burden of operating retail and hospitality businesses.

The country’s largest retail representative body said small and medium enterprises were struggling to cope with a 30% increase in minimum wage over four years, and additional sick pay costs.

REI has warned of redundancies, as well as cutbacks in opening hours and other cost reductions, if Government doesn’t cushion costs through VAT and PRSI measures.

In Galway, family-run Esquires Coffee in Eyre Square, like all hospitality and retail businesses, has been hit with multiple cost increases.

“You’re constantly rowing against the tide with price increases, and all sorts of restrictions on how you can trade. It’s nearly death by a thousand cuts,” said hands-on franchise owner, Colm McDonagh.

Last September, VAT on hospitality was restored to pre-Covid levels of 13.5%, increasing costs by 4.5%. In January, minimum wage rises pushed payroll costs up by 12.5% for many businesses.

Electricity has fallen slightly but many retailers locked into contracts when prices were rising and haven’t yet benefited from reductions.

Foodstuff prices have risen rapidly – some items have increased by more than 50%, Mr McDonagh said.

Annual commercial rates have rocketed, too. “The rates have gone to the dogs. I was paying €7,500. They sent me an estimate last September that I would be paying €19,000. I appealed it and got it down to €12,000 but that’s still a 60% increase. The thinking is, ‘Ah they’ll find a way’. You can find a way for so long, but you can’t find a way forever,” warned Mr McDonagh.

A shortage in skilled labour, such as chefs, has already impacted. Mr McDonagh currently employs nine staff, including two chefs; pre-Covid he had 15 on the books, including four chefs. Back then, it was a seven-day operation, but he’s had to reduce it to five days, Wednesday to Sunday inclusive.

“We pay everybody properly in this shop. I’m all for a living wage, and a good living wage, but there has been a mad influx of things foisted on restaurant and café businesses,” he said.

Mr McDonagh, a former travel agent, said his high-end café, which opened nine years ago this August – like many in hospitality – offers more than a cup of coffee or bite to eat.

“We see ourselves as ambassadors for our city. We are front of house that people meet for the first time when they arrive in Galway. It’s up to us as professionals to represent not just ourselves and our business in the best possible light, but to represent the city and country in the best possible light,” he said.

Esquires is a 46-seater restaurant, with friendly table service, a quality product, clean and warm environment, and free Wi-Fi. But Mr McDonagh fears those types of cafés will disappear, in favour of ‘grab and go’ shops because they can’t get staff and meet costs.

“It has become very difficult. People who never put pen to paper are emailing politicians in desperation,” he said.

“It just seems the Government – although they helped us greatly when we all had to close our doors in Covid – have closed their ears completely to the plight of this sector.

“When you speak about this in the press, often readers will say. ‘Crocodile tears’, ‘you’re cleaning up’, ‘you’re making a fortune’, ‘You can afford to close two days a week’. They read situations the way they want to read them rather than the reality.

“It’s becoming increasingly difficult to keep things afloat, especially in Galway where parking is so expensive, and we are losing our indigenous shopping – Treasure Chest the latest to go. We need help; that’s not whingeing and crying, that’s reality,” said Mr McDonagh, who warned the better choice of shops in Athlone and Limerick was impacting footfall in Galway.

Retail Excellence Ireland called for changes to PRSI and VAT to provide certainty.

More than two-thirds of REI members surveyed said they supported a national living wage but wanted help to offset costs.

Since January, sick leave entitlements increased from three to five days – REI members reported a “trend of some employees treating additional paid sick pay akin to extra holidays”.

“This avalanche of costs and policy changes has been overwhelming for retailers,” said CEO Jean McCabe. “The need for a sustainable business model that protects jobs and supports businesses is crucial. The current trajectory is untenable, and the industry needs to be supported before we start to see a wave of store closures,” emphasised Ms McCabe.

Photo: Colm McDonagh and his wife Caryl in their family-run Esquires Coffee in Eyre Square).