NI hospitality losing out to 'significantly cheaper' bills across the border

Hospitality businesses in Northern Ireland are losing customers to the Republic of Ireland because bills "can be significantly cheaper" due to lower taxes across the border, a hotel owner has said.

Selina Horshi says the situation is extremely challenging as the differing tax rates "makes a huge difference to your competitiveness".

Businesses across Northern Ireland are calling for cuts to taxes in the hospitality sector, warning that rising costs and higher VAT rates are putting increasing pressure on already tight margins.

In the UK, VAT is charged at 20% compared to 13.5% in the Republic of Ireland and that gap is set to widen with the rate for food-led hospitality dropping to 9% in the summer.

Northern Ireland's finance minister has made the case for a system that allows businesses to compete in an all-island economy, but the Treasury said reducing the rate for hospitality on a regional basis would "introduce complexity".

Businesses say a lower rate would allow hospitality to keep prices more affordable for the public.

Colin Neill from Hospitality Ulster said the UK's higher VAT rate put Northern Ireland "at a huge competitive disadvantage".

Horshi, who owns a hotel in County Londonderry, said competitors just a few miles away in Donegal can offer lower prices due to the difference in tax rate.

"A customer looking at where they might want to spend a night, where they might want to celebrate their wedding is not looking at a different tax policy, they're looking at the final price and the final prices can be significantly cheaper in the Republic of Ireland than in Northern Ireland simply due to that tax policy," she said.

Horshi added that this was having a big impact on hospitality businesses in Northern Ireland.

"Whether that is somebody who's booking a single event or whether that is a big multinational tour company who brings thousands of tourists in on buses," she said.

"Imagine if they're making the decision as to whether they stay in Derry where it's more expensive, or they stay in Donegal where it's cheaper.

"Suddenly our city just becomes a day trip. They walk the walls which are beautiful, they go to the Guildhall but essentially they haven't spent a penny in this city.

"They aren't spending money in local retail, in local pubs and they're not putting money into local taxi drivers' pockets."

James Huey from Walled City Brewery in Londonderry said if VAT dropped to 9% it would "change the landscape in terms of our competitiveness".

"Basically where we are in Northern Ireland, if you were setting up a hospitality business and you were in any way flexible in terms of where you would put it, you would certainly put it in Donegal or Cavan or Monaghan," he told BBC Radio Ulster's North West Today programme.

Huey said independent hospitality businesses in NI are making one or two pence for every pound made but that could jump to 10p if taxes were lowered.

Olga Patterson who runs The Derg Arms in Castlederg, said: "Northern Ireland will see a deficit going into the south and people won't come up to Northern Ireland if the VAT rate isn't reduced."

Speaking to Evening Extra, Patterson said the difference in cost will lead to "a lot of tourism staying in the south".

As her business offers overnight accomodation as well as a restaurant, she said she has to "pay 20% on food and 20% on accomodation".

Patterson said she hopes something can be done to bring Northern Ireland in line with the Republic of Ireland, to "keep businesses open and keep jobs".

Cafe owner Tiffany McKay said business owners like her were being forced to make some "extremely painful" decisions.

McKay, who owns a cafe in Carnlough, said she was having to make other decisions to help manage costs.

"Maybe that means we go down to three days a week, which we do for six weeks in the winter," she said.

"But whenever we cut the hours down, that wage increase our staff members got this year is effectively negated.

"We're doing everything we can within our zone of control and yet it still doesn't feel like it's enough."

She said passing costs on to customers also felt "a little bit like a moral crisis because we don't want to be unable to be afforded by our customers and we know they're feeling the squeeze as well with the cost of living being what it is".

Hospitality Ulster's Neill said the situation is exacerbated by the fact visitors from the Republic of Ireland were the biggest tourism market for Northern Ireland.

He said lots of hotels, bars and restaurants relied on trade from across the border for weddings and functions and that the 9% rate being introduced in the Republic in the summer would affect them.

"If your wedding is going to be 11% cheaper, where are you going to go?" he said.

"We've already started losing businesses, we've seen them cutting hours, cutting days and indeed the headline of 2,000 jobs reduced in the hospitality sector in Northern Ireland is because we're just not viable now."

Hospitality Ulster is lobbying the UK government for a pilot scheme "to prove to Westminster how quickly it [reduced VAT] pays back".

The Treasury said reducing VAT for hospitality, on a regional basis, would "introduce complexity for businesses and reduce the revenue available to fund vital public services".

It added that the executive received a record £18bn settlement in 2025-26 and can provide further support to hospitality and tourism "should they choose to".

A spokesperson for the Department of Finance said the power to change VAT rates rested solely with Westminster.