On 23 June 2016 the United Kingdom voted to withdraw from the European Union following a nationwide referendum. The ‘Brexit’ decision, decided by a 52% majority of the population who voted to leave the EU, will have far-reaching consequences for many industries in the UK, not least the foodservice and hospitality sector. Two weeks on from the decision we look at the reaction from experts in the sector.
The initial reaction from FCSI was one of dismay at the decision. “We are very sad about the result, which surprised us,” says Martin Rahmann FCSI, chairman of FCSI Europe, Africa and Middle East. “Although I was born and raised in Germany where I live, I feel like a European. This is also the reason why I’ve been so engaged with FCSI for many years. Now we wait to see which policies will be activated.”
72-hours in: the reaction
The British Hospitality Association (BHA)’s Hospitality & Tourism Summit followed hot on the heels of the result on 27 June. Over 500 investors, business and government officials attended the event in London, less than 72 hours after the referendum.
According to BHA chairman Nick Varney, who opened the Summit, Brexit could open up opportunities for the hospitality sector in the UK. Varney, acknowledging that the immediate uncertainty would provide a challenging backdrop, said the benefits of a more favourable exchange rate should benefit the industry in attracting inbound and domestic tourism.
Varney also called on businesses and government to “seize the moment” and capitalise on the competitive advantage, urging businesses to support the BHA’s ambition to develop “a single cohesive and effective campaign” to ensure favourable outcomes on immigration, taxation, regulation.
Fellow speaker Andrew Sentance CBE, senior economic adviser at PwC and former member of the Bank of England, referred to the immediate impact of uncertainty on the markets and Sterling’s fastest depreciation in 60 years. 2016 economic growth projections would be revised down, he said, but on the positive side the weaker Pound would present opportunities for export led industries like hospitality and tourism.
Government, said Sentance was responsible “for the creation of an environment in which business thrives, the economy and society flourishes”. Given the circumstances and a 45% incremental tax rate on every Pound currently earned in the UK, he advised government to reform the tax system.
Rt Hon John Whittingdale MP OBE, secretary of state for culture media and sport and a supporter of the Leave campaign, said thanks to the UK’s historical, natural and cultural assets, hospitality and tourism was going “from strength to strength” and that “no Referendum result would change that”. Whittingdale underlined the opportunities presented by Brexit, suggesting a reduction of VAT on Tourism was now possible.
Lord Hague, former foreign secretary and leader of the Conservative Party, provided the closing keynote address at the summit and, though a Eurosceptic had been supportive of the Remain campaign. He urged the industry to “seek out the advantages among the many disadvantages” while acknowledging the current situation presented prime minister David Cameron’s successor with the “most complex set of circumstances for the British Government since 1940.”
Market volatility
Foodservice market analyst, Horizons has meanwhile forecast a period of uncertainty for the industry following the referendum result. “The foodservice sector will be less buoyant than it would have otherwise been – but the effects will be felt differently in different sectors,” the company stated. “Profits – and therefore investment – are under threat. The implications are unknown but in the short term, there will be volatility in the markets – and there will possibly be a change in consumer sentiment. In the medium term, volatility will continue.
Craig Allen, co-founder of The Change Group, London’s largest hospitality recruitment company, said of the result: “The result of last week’s referendum was a shock as was Cameron’s resignation. The subsequent crash of sterling and the markets should not come as a surprise as uncertainty is never a friend of the markets. We now face a period of ambiguity,” he said.
“Over the next few months there will be much speculation and many ideas of what will/should happen. The recruitment industry will be affected in some sectors, notably finance, though we believe the hospitality market will stay relatively stable. The foreign nationals in the UK should not worry as it is unlikely their status will change but we may see a short term influx of EU nationals coming into the UK before any potential changes are announced.”
The impact on employers and employees
Aneil Balgobin, partner and employment law solicitor at Simpson Millar believes it is now time for employees to dig out their work contracts. “Employers will have been making emergency plans for weeks and months; employees will no doubt feel less prepared for the impact a Brexit might have on their jobs and that reality is about to hit home. Employers need to be swift in reassuring staff who could feel destabilised and may be looking outside Britain for a more secure role – triggering a talent drain at a time when many companies need their core capacity the most,” he says.
“The contingency plans of some businesses may well include restructuring exercises, which could also mean redundancies. But this is a time for calm while everyone takes stock. The worst thing employees can do is make rushed decisions they may later regret. This could be a time of opportunity for businesses built on a sound foundation that are able to take advantage of the space left behind where others may retreat,” he says.
“Employees in the sectors that will be affected immediately might want to dig out their employment contracts this weekend and update themselves with the most relevant paragraphs such as restrictive covenants and redundancy terms. Businesses that find themselves needing to shed liabilities quickly may be keen to negotiate settlement agreements, and it is crucial that employees take legal advice to know where they stand before entering into such negotiations.”
Many tax experts also predicted tax rates would be raised following the referendum. “George Osborne has indicated that tax rises are likely to follow the vote for Brexit,” says Elizabeth Bradley, partner, head of corporate tax at BLP. “It is imperative that these are not levied on business. It is imperative that this burden does not fall disproportionately on business. The government’s priority must be to do all it can to preserve our competitiveness, including that of our tax system.”
One positive result of the referendum is that inbound tourism to the UK may benefit from, at least a short-term, uplift. According to hotel and holiday deals website Travelzoo, the leave result from Britain’s EU referendum has led to a surge in the number of searches for UK hotels and holidays from overseas tourists as they look to take advantage of a weakened pound.
Michael Jones
