A Dublin hairdresser fears the increased VAT rate announced in today's Budget will see customers turn away from the salon and to the shadow economy instead.
The Irish Hairdresers Federation had asked the government to keep the 9% rate to help small salons keep their doors open. However, Minister Paschal Donohoe today confirmed that the 9% VAT rate for the tourism and hospitality industry will expire as planned on February 28, 2023.
Lisa Eccles from Zinc Hair & Beauty in Kilmainham said that many people would turn to the shadow economy to get their hair done as salons struggle to keep their doors open during the cost of living crisis. The spokeswoman from the Irish Hairdressers Federation said that hairdressers have been largely forgotten about in today's budget.
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She said: "People are already struggling with the cost of living and they are trying to find ways to cut their costs. Unfortunately, getting your hair done is a treat for a lot of people. They are going to reconsider and wonder if they should just get someone that would come to their house to do it.
"There are legitimate freelancers, people who are paying the VAT but there are a huge amount of people who are in the shadow economy. That has a knock one effect where we are not able to recruit staff because people just decide to do some 'nixers' as you call them."
Lisa has also seen a huge increase in her energy costs this year.
"For me , I was locked into a rate until June of this year and then my contract was up," she said. "The cheapest utilities rate we could get at the time was 39c per kilowatt of energy.
"Last year, my monthly cost for electricity was around €250 and my latest bill which was over a six week period was €1,500. That's just not sustainable in the long run. I need electricity to heat my water, to run the blowdryers, to heat the premises.
"There's no other option there from us. We haven't even gotten into winter yet. At the minute, the heating is off."
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Lisa said she has already seen customers stop coming in to treat themselves with salons never really recovering from Covid-19 lockdowns
She said: "We have already seen a drop off in the frequency that we see clients. People are trying to stretch their appointments out a little bit longer.
"When I look at the amount of clients and the income from July, August and September of last year compared to this year- we are down. That's people trying to stretch out their appointment times a little bit longer. Maybe, getting a little less done.
"They won't get the colour. They might throw in a box colour themselves at home. Everyone is really feeling it.
"The only thing that is helpful is the electricity help. That doesn't help me with my stock costs that just continue to go up. Obviously, you need the stock to run your business."
Lisa especially worries for older customers whose visits the salon might be the only social outing they have in a week.
"A lot of salons have a lot of elderly people that would come in," she added. "It's the one place that they get to go during the week. It makes them feel part of the community in towns and villages across the country.
"You can't have them coming into a cold premises to be sitting with wet hair. You have to have the heating on. We have no choice in the matter.
"The VAT increase is just going to have to be passed onto the consumer. We simply can't absorb a 4.5% increase in the VAT. You can't absorb that. You have to just pass that on. The worry is whether or not clients will come back to the salon.
"The elderly customers are a different generation. They have been through really tough times before. They will knuckle down and look at where they are spending their money.
"I know how concerned my elderly clients are about the cost of heating. They are afraid to even put their heating on. A lot of them went through a very difficult time with Covid where they felt cut off from the community.
"They were afraid to leave their houses. A lot of them have only recently gotten the confidence back up to go out again. Now, it's like we are going backwards. They are going to be so afraid to spend money that they might just stay at home and throw in rollers themselves. That is going to lead to a very lonely winter for them."
Lisa believes that salons around the country will have to close their doors this winter with little hope provided in today's budget announcement.
She said: "I know salon owners already who just feel so stressed. They are at the point where they are no longer profiting. They are not running a profitable business so how can they keep their doors open? They just can't.
"I've heard of some salons closing during the week so they don't have to have their electricity or their heating on during those days. The Irish Hairdressers Federation is always there for our members and for anybody in the industry that needs to reach out and look at what they can do to be more profitable."
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