Restaurants in Estonia are closing due to rising costs
In Estonia, restaurant closures have been occurring almost every month this year. On Sunday, Ülo in Tallinn’s Kalamaja district will cease operations. Establishment owners cite more cautious spending by visitors and rising labor costs, taxes, gas and electricity prices among the reasons, ERR News reports.
Declining revenue and pressure on profitability
Ülo co-owner Stiv Heinloo said that in 2024 the restaurant made a profit of €24,000 on a turnover of €619,000. In 2025, its turnover fell by 18%, and the establishment ended the year with a loss of nearly €24,000. Heinloo also runs the Pegasus and Rataskaevu 16 restaurants and said there are no plans to close them.
In Tallinn, La Tabla, Lendav Maaler, Rudolf, Vatican, Pomo, Barbarea, O2, Tai Boh and St. Vitus have already ceased operations this year. Tartu restaurateur Henry Loodmaa, whose restaurants include Pompei, Kampus and Humal, said the situation in the city is similar to that in Tallinn: visitors are considering their spending more carefully, including ordering expensive wine, while the cost of raw materials and labor continues to rise.
More current news is available on the UA.News Telegram channel Telegram.
Proposal to lower VAT
The Estonian Hotel and Restaurant Association said the sector’s turnover has been stagnating for two years while costs are rising. The organization considers lowering the VAT rate for food establishments from 24% to 13% a key step.
According to the association, the 24% rate is the second highest in the EU and nearly twice the Union’s average. The sector’s average profitability has fallen to just over 1%. The association forecasts that if cost pressure and low profitability persist, Estonia could lose nearly 600 food establishments and 2,800 jobs by 2028, mostly outside Tallinn.
