Additional cost-of-living package

Last week, the Government announced an additional cost-of-living package worth €1.3bn. The main focus of the package was providing additional support to families via a variety of targeted measures due to be paid in April and June.

For businesses, the supports announced were extensions of existing schemes rather than any new ones. The most significant announcement related to the continuation of the 9% VAT rate (down from 13.5%) for the hospitality sector for a further 6 months and the extension of the Temporary Business Energy Support Scheme (TBESS) until the end of May. 

There had been some debate in recent weeks about whether or not the 9% VAT rate would remain past the end of February with the Government at pains to state that the reduction had only been a temporary measure. However, with inflation at 7.9% currently, pressure had been on the Government to extend the rate reduction for a further 6 months. The 9% VAT rate will now been in effect until the end of August which covers most of the seasonal peak trading period for Ireland as a whole. At that point, the Government will have a decision to make in terms of making the 9% VAT rate permanent or increasing it back to 13.5%. The VAT rate reduction will have been in place for nearly 3 years at that point and was put in place at a time of low inflation. Therefore, an increase back to 13.5% will likely lead to real price increases for customers which could hurt consumer sentiment. 

Perhaps most interestingly, the TBESS scheme has been extended to the end of May which is welcome. However, the scheme has now been amended in a number of ways that should make it more accessible to businesses. The threshold for qualification has been reduced from a 50% increase in electricity and gas costs to 30%. This will bring a large cohort of businesses that weren’t previously eligible for the scheme into it and importantly, this threshold reduction has been backdated to September 1st. In addition, the level of rebate has been increased from 40% of the increase to 50%, however, this is only effective from the 1st of March. It is unlikely that this scheme will be extended past the end of May given that wholesale energy prices are back down at more normalised prices and while it takes time for these reductions to filter through to retail pricing, energy firms, who increased prices aggressively earlier in the year, will be under pressure to reduce pricing just as quickly. 

There are some tangible benefits to businesses in the measures announced last week and it is important to check your eligibility to the scheme and with TBESS being backdated to the 1st of September for newly eligible businesses, it could be a welcome injection of cashflow into your business. On that note, if you need additional cashflow in the build up to the busy Spring/Summer season, GRID is well positioned to grow with your business as and when you need us via our flexible lending products.