Brexit – after the shock comes the confusion

 

At the time of writing (8 weeks after the Brexit vote), it’s clear that the UK is in no great hurry to start formal divorce proceedings from the European Union by triggering the Article 50 process. The new Prime Minister, in appointing Boris Johnson as Foreign Secretary, has ensured that the public face perhaps most responsible for the “leave” vote will be man who, if things go badly with our European partners, ends up carrying the can. Our German readers might call it “schadenfreude”.
Over the next three years, Johnson will face some tricky conversations. Elections will take place in France, The Netherlands and Germany during that time.  So, there is a natural reluctance to start trade negotiations that may not be honoured, or enter into discussions with Messrs Hollande and Merkel whilst they have one eye firmly fixed on their domestic electorate. As a consequence, some are predicting it could be 2019/20 before we fully exit the EU. How has the Brexit vote affected the industry so far and what should operators be doing?

 

You don’t have to look far for a survey on industry reactions to the referendum. CGA Peaches report on hospitality CEOs’ opinions showed that 53% had lowered their forecasts for the next two years.

In contrast to CEOs’ concerns, Visa’s UK Consumer Spending Index showed that spending on hotels, restaurants and bars increased in July. Perhaps this is due to some good weather and sporting events attracting pub-goers, or to Brits opting for a staycation rather than going abroad. Alternatively, the exchange rates currently available to foreign visitors may have attracted more overseas holiday makers.

 

Immigration was one of the major themes of the referendum and the Leave vote will clearly lead to uncertainty for the large number of hospitality employees who have come to the UK to live and work. Theresa May has yet to offer EU citizens living here any certainty over their future. Whilst nobody could seriously envisage people being told to head for Dover, many hospitality workers must now be wondering if the UK is still as welcoming a place to live and work. Some industry leaders, such as Richard Caring and Jeremy King, have issued strongly supportive and reassuring statements to their employees; this should be applauded and adopted by all employers.

Employers already find it increasingly difficult to source native chefs for Asian and Indian cuisine due to visa restrictions. Will this now also extend to Spanish, French and Italian chefs?

“Theresa May has yet to offer EU citizens living here any certainty over their future. Whilst no-one could seriously envisage people being told to head for Dover, many hospitality workers must now be wondering if the UK is still as welcoming a place to live and work.”

Cost increases also remain a concern. Overseas products have instantly become more expensive, thanks to poor exchange rates, and there are concerns over locally sourced goods. With less foreign workers to pick them, will harvesting crops become more expensive or even completely uneconomical for UK farmers?

So, what can you do to stay sane in all this chaos? At this stage, in my opinion, your priorities have to be your finances and your people.

Firstly, check any loan agreements you have. We have seen the fall in the value of sterling bring some businesses close to breaching their bank covenants. Lenders may be willing to renegotiate terms. It’s also worth talking to suppliers to check their plans for price rises. Agreeing the cost of supplies for a fixed term could help you manage your own price increases.

Now is also the time to make use of your business forecasts. If you keep working with them, they’ll help you see trends emerging and costs shifting so you can predict and respond to change.

Taking action to make sure your staff feel welcome and valued is just as important to creating some sense of stability. Reports of increased abuse of foreign nationals before and immediately after Brexit were shocking and disheartening. Hard working staff of any nationality, who deliver a good customer experience, will always be valuable to the hospitality industry.

I was a strong and vocal supporter of the Remain campaign. Like many, I was dismayed at the vote to Leave. The hospitality sector, centred in global, multi-cultural and Remain-voting London, faces some significant challenges. How and when they will manifest themselves is not yet fully clear, and I am reminded of the opening line of the famous Fred Astaire song; “There may be trouble ahead”. Whatever the future holds, it will be a bumpy ride to get there.

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