High electricity bills are pushing many restaurants and cafes in Lithuania to close down, but the government is not planning any relief.
The Tabera restaurant in Vilnius is celebrating its 27th anniversary this year. Such longevity in the catering business is rare. However, it is now operating in crisis mode – only three employees are left and they work but a few hours a day, during lunch.
Having struggled during the pandemic, now the restaurant is hit by massive gas and electricity bills.
“It’s hard to say what the bills would be if we were running at full capacity. But even now, working part-time, they are still in the four digits,” says Arnoldas Dainovskis, spokesman for Tabera.
Heating is turned down to the minimum, he notes, “just enough to keep warm, you would have to sit with a jacket”.
The family business, which has been doing relatively well before the energy crisis, is planning to close temporarily and reopen when the heating season is over.
Keisti Zenklai, another cafe in Vilnius, has been open for 25 years, but it is now closed. The manager says it is not planning to reopen.
Difficulties started during the pandemic, but the final nail in the coffin was the energy price shock.
In an even more precarious situation are businesses that rent their premises. Taking a break for the winter is impossible, since they would still need to pay rent.
Although that at the moment is not even the biggest expense.
“We are already paying two or three times more for electricity than we pay for rent, even before we get the heating bills,” says Liutauras Ceprackas, head of the Association of Caterers.
“I don’t think it’s the kind of risk you can foresee – that electricity may become a luxury item. We used to take electricity for granted, but nowadays is becoming a Louis Vuitton item in our sector,” he adds.
In August, 11 out of 70 companies that went bankrupt in Lithuania were catering companies, according to data from Creditinfo. In September, 8 out of 64 were restaurants or cafes.
A total of 134 companies went under in the country during the two months, including 19 catering establishments, or 14% of all bankruptcies.
Another hit may come in January 2023, when a 9% VAT rate, introduced by the government to help cafes and restaurants survive the Covid-19 lockdowns, expires.
Finance Minister Gintare Skaiste said that the measure was temporary, would expire at the end of the year, and the government was not planning to extend it.
Instead, Skaiste says, the government is planning to offer preferential loans for businesses in need of cash.
“These loans are like a joke,” Cebrackas is unconvinced, however. In order to qualify for the loans, businesses need to prove they are viable and will be able to pay them back.
“But we come as a company in difficulty under the government’s programme for companies in difficulty,” he says.
Restaurant, cafe and bar owners say they need a real support. Economists also agree that the time has come for the government to support business so that it does not have other problems later on: bankruptcies and rising unemployment.
“The rise in bankruptcies is not only a blow to the sector, but to the whole labour market. And then this hit could have a domino effect on the entire economy,” says Jekaterina Rojaka, head of Business Development at Creditinfo Lithuania.
“We are considering and calculating a measure for the businesses that are hardest-hit by the energy crisis, those whose energy costs account for at least 10% of their total costs,” Finance Minister Skaiste says. “Those businesses that meet this definition are likely to be offered a tax deferral measure.”
Restaurant and cafe owners say the sector will soon become extremely stratified in terms of quality and prices. What will be left are upmarket restaurants and cheap snack bars – and very little in between. (LRT/Business World Magazine)