How Will Brexit Affect The Hospitality Industry?
When Felix Baumgartner made his
jump from the edge of space he probably hoped he had thought of every risk before stepping off the platform. The UK public voted for something similar in many ways on 23 rd June and Theresa May is now in charge of navigating the UK’s step into the unknown. Her speech clearly raised the flag in support of the public vote – Brexit does mean Brexit and the process will take the UK not just out of the EU but also the single market. Clearly there are those who are dismayed and those who are pleased with this but in reality will this have an immediate impact on businesses in the hospitality sector?
The PM has said that there will be no”cliff edge” for businesses, but there will be a period of implementation which should allow them to prepare and become Brexit ready. Whenever key statements about Brexit have been made in the past we have seen the markets respond negatively, weakening sterling and creating pressure on import costs. These directly impact businesses and result in food, fuel and equipment import costs increasing which no doubt will be passed on to the customer/consumer – a negative impact for sure. There is, of course, the glass half full approach and initial indicators showed that the pound actually strengthened during the Prime Minister’s speech. We may see that this key statement raises confidence and reduces import costs as a result. The reverse is of course true for exports so buyers beware but, for salesmen opportunity might knock!
In the longer term the impact of tightening immigration controls will potentially change the make-up of the workforce in the hospitality sector. Currently this industry generates 2.9 million jobs, 43% of which are occupied by foreign nationals. The terms of Brexit are currently unknown but if they impose costs on businesses, require non-UK residents to leave or have stricter controls on their movement implemented then this really could have a strong impact on the availability of a significant proportion of the hospitality workforce.
A reduced available workforce can of course have significant effects. The rule of supply and demand would no doubt bite, with labour costs increasing. Again this would either result in reduced profits for businesses or increased costs for consumers. Reduced spending in the High Street impacts the Treasury and the vicious cycle of boom and bust will no doubt rear its head again. As such, the detail of new controls will be awaited with bated breath.
Away from money matters, free movement has brought some amazing improvements to the labour force in the UK hospitality industry. There is little doubt that service and quality standards within hospitality have improved since the EU borders were opened and expanded. The loss of expertise will be felt heavily, with the risk that these standards could fall to pre-2004 levels.
From a legislative point of view there are many food safety, food standard, trading law, health & safety and occupational health related regulations based on EU legislation which are entrenched in UK statute. It’s extremely doubtful whether there will be any desire to repeal any of this legislation. The UK has always led the way when it comes to safety standards so it is unlikely that legislation would be repealed to soften current controls. The bad old days of no bendy cucumbers and outlawing selling in pounds and ounces are behind us so there should be no race to the bottom here.
Whilst there are many arguments both for and against Brexit we are where we are and, in many ways, this is a fascinating time whether you look at it positively or negatively…and we haven’t even mentioned Donald Trump! Felix Baumgartner landed safely so here’s hoping that the UK will also land safely post Brexit.
By Mike Williams