Irwin Mitchell's Stuart Gallyot Shares His Insights

In fear of stating the obvious there are clear ‘sides’ of the Brexit debate. Whichever side you are on the hiatus created in the political process from March 29th 2019 onwards makes the old adage ‘Hope for the best, prepare for the worst’ very difficult to comprehend. At the time of writing it’s difficult because we don’t know what the worst is, when it’s coming or indeed if it's coming at all, or what the scale of worst or best could be. So what is the impact on the hospitality sector?

Despite the debate over the course of the last nearly three years, and 1000+ days, the hospitality trade has seen a number benefits and drawbacks, both in the short-term and ones that are becoming clear in the long-term. The current significant ‘silver-lining’ is the weakness of the pound, almost certainly brought on by the Brexit vote. The influx of tourists into our Green and Pleasant Land has a direct impact on the hospitality sector; hotels, pubs, holiday destinations, tourist attractions etc. The cost of foreign holidays for UK residents makes holidaying in the UK more attractive, the stay-cation is certainly providing additional upside.

Adding to some of the positive results, but nothing to do with Brexit, in the last 12 months we’ve had some great sporting events and last summers weather proved phenomenal for trade - this upside may mask some of the under lying pessimism generated by the uncertainty in some corporate boardrooms. It could also be argued that the up turn in trade has been due to most of the UK population simply getting away from the political wrangling and going out, to the pub, restaurant or having a long weekend the YOLO* factor.

Unlike a sector like the automotive industry where parts go across borders to be assembled, and then moved on again to be finally assembled where frictionless boarders are essential, most of the supply chain for the Hospitality Sector is UK based. Clearly the basics of food and drink are the requirements which hopefully can be retained post-Brexit (hard, medium or soft), without Brexit or indeed for an extended hiatus, for the Hospitality sector - but more importantly for the Public as whole!

So; short-term, the effect of the Brexit process has mainly positive consequences.

However, in the medium-long term there will be a significant challenges, specifically skills shortage for the hospitality sector. The hospitality sector has, for a number of decades, relied upon migrant labour. Recent surveys have shown that the number of EU national applying for hospitality roles has declined markedly over the last 2-3 years. Wages are on the rise as the supply of quality ‘hospitable’ people dries up, and the back-of-house jobs; chefs, kitchen staff, cleaning staff, which have always been challenging to recruit for, will almost certainly get worse.

There needs to be a massive PR drive, by employers and trade organisation, to bring young people into the hospitality sector. There needs to be genuine opportunities where employers start to make key roles more flexible so that anti-social hours can be off-set with family and leisure time. Training for roles will be essential and clear paths for career advancement, with advocates of the ‘bar to boardroom’ opportunities, leadership and management roles need to entice aspirational young people into the sector.

The additional cost burden on business will see some consequential failures; as this along side the increases in business rates and other regulatory costs will see margins squeezed. The on-going demands of the social-media, and the experience led culture of hospitality may have more of an impact on the overall sector than Brexit - but the current short-term bubble will almost certainly burst. 

The obvious point which worries most of the Executives I have spoken to is a concern that for any reason the UK slipped into some form economic decline and recession due to Brexit, the effect would be challenging and stall significant economic investment.

The subliminal concern for most is that change is happening due to Brexit, whatever the outcome, and that in itself raises concerns. Perhaps the old adage ‘Prepare for the worst and hope for the best’ has never been more relevant!