With the keys to Number 10 now firmly in his grasp, Boris Johnson’s top priority list as the new UK prime minister probably doesn’t feature the hospitality sector. Brexit and international trade relations will be battling for the top spot. But the knock-on effects of his decisions on both fronts in the coming months will undoubtedly affect the foodservice sector.
“It is no secret that high streets have suffered and hospitality business have felt the effects,” says UKHospitality chief executive Kate Nicholls. “Perhaps the most important thing is that the new prime minister has a grasp of what hospitality excels at and really gets why our sector is so vital socially as well as economically. Positive action that supports our sector should flow from an understanding of why hospitality businesses are so important to communities.”
In a separate UKHospitality press statement, Nicholls talks of needing “a sensible Brexit outcome” that eliminates uncertainty. “Tariff free trade on food and drink with the EU”, businesses being able to continue to recruit with a post-Brexit immigration policy that “supports recruitment” and a “tourism deal that will upskill our domestic population”. All very aspirational stuff. But as the UK heads, it seems, inevitably towards a ‘no deal’ scenario, the reality will probably be a lot bleaker. Something Nicholls conceded when we spoke earlier this week.
“The prospect of a no deal Brexit creates significant uncertainties for hospitality businesses, which are heavily reliant on supply chains over which they have little influence in the context of Brexit preparations,” she says. “This is where UKH has been focusing much of its input to no deal planning with government.”
These sentiments are supported by Matthew Merritt-Harrison FCSI, chair of FCSI UK & Ireland, who insists “no deal would be catastrophic. It will cause a huge disruption on the supply chain, staff recruitment and retention. When we say supply chain, it’s not just food for the catering operators, it’s also in terms of equipment providers. Most of them are based in Italy, France and Germany and there will be tariffs of about 20% if we have a no deal.”
So, Merritt-Harrison insists the government needs to provide assurances that supply chain isn’t just going to fall off a cliff edge on 31 October. He even suggests it might be worth retailers bringing forward their capital expenditure plans and buying a load of equipment now to hedge against a rise in prices.
Nicholls also talks about the need to tackle costs that restrict investment, most notably business rates, calling for a wholesale review of the system. “Business rates are arguable the biggest restriction on investment for hospitality businesses and our sector has been hit very hard by extortionate rates that have continued to increase.”
Merritt-Harrison agrees this is an issue and has been for some time, especially as we’ve seen a lot of business go under recently. But he believes it’s just one factor. “It’s also about getting volume of sales back in to pay for the business rates. Ultimately, if we had confidence in the economy and where we’re going, then people’s discretionary spend would go up and that would fund business rates.”
Mark Dempsey, consulting director at GlobalData, agrees it’s about getting confidence back. “At times of uncertainty, consumers inevitably will generally stop spending on things they deem to be a luxury, such as eating out. People trade down. Those who prefer fine dining will revert to casual dining instead, and the casual diners will move to quick-service restaurants [QSR]. If Boris Johnson doesn’t quickly fix the angst in the UK –’is Brexit going to be bad?’ ‘Am I going to lose my job?’, etc – and reduction in spending, that is going to have a huge effect on the food sector.”
Dempsey also points to concerns about costs and tariffs that non EU members pay. “With a no deal, small businesses could go out of business, while the bigger chains that can afford to invest will continue to do so. That means all the great choices and diversity we’ve built up over the past 10 to 15 years will disappear,” he warns.
Another hot topic for Johnson to address is the much talked about problem of immigration. “So far, we have heard headline statements, rather than detail, so it is not certain how much of a challenge this might pose,” says Nicholls. “The majority of people working in the hospitality sector are home-grown, but businesses do need to complement them with staff from outside the UK. If immigration is severely restricted to just high-skilled migrants, then some businesses will find it increasingly tough to fill roles. It is important that there is a focus on a migration policy that best serves the economy as a whole.”
Ultimately, whether you’re pro or anti Brexit, “industry must take onboard and manage the change as soon as possible,” concludes Merritt-Harrison. “If we’re still talking about these issues and the concerns we have come the end of September we’ll be in serious trouble.”
Food for thought, indeed, for the new prime minister.