Weighing up the pros and cons of Brexit for the hospitality industry underlines the need for a robust response to seize opportunities and deal with the drawbacks, by Charles Orton-Jones.
No industry has the guts and determination of hospitality. During the Second World War, the fish restaurant Wiltons soldiered on through the Battle of Britain and the Blitz, until in 1942 a bomb landed by St James’s Church, Piccadilly giving the walls a hearty shake.
Proprietress Bessie Beal announced to diners she would be leaving London. A loyal customer, the banker Olaf Hambro, dining alone, asked for the cost of the restaurant to be added to his bill. The Hambros run it still. Like showbusiness, the show always goes on.
In this uncertain post-Brexit referendum period, the industry has been debating whether it will need to draw once more on Churchillian resolve though the gloom or if we are moving forward into broad, sunny uplands.
Early verdict? The falling pound is giving the industry a huge boost. Sterling fell to a 31-year low against the dollar, and plunged against the euro and other world currencies. It’s been terrific news for exporters and tourism.
“We have seen direct evidence of this,” reports Eduard Elias, managing partner of Cycas Hospitality. “Immediately after the Brexit vote, when the pound dropped in value, pre-paid bookings in our London hotels went through the roof.”
Tax-free shopping company Global Blue announced a 7 per cent year-on-year increase in UK international shopping in July. Chinese tourists spent 6 per cent more. Newspapers such as the Los Angeles Times have run special coverage on the affordability of UK holidays.
There’s also the impact of British holidaymakers remaining at home – the staycation. Brits spent 12 per cent less in Ireland this summer. The Irish food and drink industry body demanded government action to mitigate the hit from the UK departing the European Union.
In France, terror attacks hammered visitor numbers, with the number of Japanese tourists in Paris falling by nearly a half, Italians by a quarter and Russians by a third.
Looking longer term there’s less to celebrate. The issue of work visas is a huge worry. If net migration is cut to the tens of thousands promised by home secretary Amber Rudd, then hospitality is in for a big change.
One entrepreneur enjoying a boom, but worrying about a bust, is Kelvin Newman, director of the BrightonSEO conference. “At our events, attendees arrive in their droves from across Europe and beyond,” he says. “This [Brexit] has a very real potential to be bad news for us, but it would also have a knock-on effect on Brighton, which boasts strong cultural and business communities. That’s where the ripples begin and eventually these ripples can turn into shockwaves.”
The cost of travel may go up. Markus Kuger, senior economist at Dun & Bradstreet, warns: “Less positively, it is worrying that Britain could lose access to the Open Skies Agreement between the United States and the EU in the long term, pushing up air fares for travellers to and from the UK.
“Additionally, recent comments by Ryanair and easyJet representatives indicate that low-cost airlines could reduce the number of flights operated to and from the UK. This would discourage foreign tourists, but increase incentives for Brits to spend their holidays in the UK.”
Procurement may change. Australian trade minister Steven Ciobo has been talking up a free trade agreement (FTA). Asked about the prospect of cheaper wine, he said: “Look, absolutely. Cheap Australian wine I think is a good fringe benefit of an FTA if we are able to put one in place.”
Legislation will be overhauled. Fiona Sinclair and Mike Williams from STS Solutions, and Enrique Garcia, an employment law consultant with ELAS, conducted an examination of affected areas. The 1998 Working Time Regulations is one area they highlight as being a major EU policy which can now be repealed or adjusted.
They say: “The regulations influence weekly working hours, rest periods, paid annual leave and extra protection for night workers, and while it’s difficult to say how each of these points will be affected, it’s more than likely they will be restructured beyond current recognition. But it is unlikely that they will be completely repealed. This could particularly impact on the restaurant and takeaway industries where employees typically work long and often unsociable hours.”
Agency workers’ rights is also an EU initiative the industry wants repealed. This would impact the restaurant trade and sectors with seasonal workers.
And areas not affected? The national minimum wage, TUPE legislation covering transfer of undertakings and protection of employment, discrimination and unfair dismissal laws are either British in origin or well regarded, so are unlikely to change.
One group which may benefit from Brexit is young British workers. A fall in competition from EU workers means the sector will need to recruit locally. A pioneer in the field is Fifteen Cornwall, created by chef Jamie Oliver as a social enterprise restaurant devoted to training apprentices – 112 so far, all to elite chef standards.
Matthew Thomson, managing director of Fifteen Cornwall, says: “The progressive modernisation of the sector ought to be an opportunity to make it a preference for British workers. We’ve got to do better at creating clear entry points and progression routes for career changers as well as young people in order to fill the skills and talent gaps that impact on service quality, growth prospects and productivity.”
Peter Ducker, chief executive of the Institute of Hospitality, agrees. “We know about our staff shortages,” he says. “And we read and hear from friends and relatives that the thought of a graduate debt of £40,000 is putting some young people off taking the university route. We also know that the impending Apprentice Levy is exercising the thoughts and training strategies of many businesses, and the rationale behind apprentice programmes is now more compelling.
“We know that our industry has been perceived as a career of last resort for too long and perhaps we have ourselves to blame for not grasping the nettle sooner on this score.”
If Brexit squeezes the supply of cheap labour, we’ll have no choice but to attract, recruit and train our own staff.
In the end, the fate of the hospitality sector lies in its own hands. With the right long-term approach, the downsides of Brexit may be avoided altogether.
This article first appeared in The Times Raconteur supplement on 22nd September 2016