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Business as usual? Hospitality reacts to Brexit

27 June 2016 by
Business as usual? Hospitality reacts to Brexit

Since the result of the EU referendum emerged on Friday 24 June, The Caterer has been in touch with figures from across the hospitality sector to gauge their reaction to Brexit and what it all means for the industry.

One very clear message is that no-one really knows what happens next, but in the meantime most are determined to stay upbeat and carry on as if it were business as usual.

And there is also a direct appeal now for strong leadership, coupled with a hope that hospitality's voice is heard loud and clear and the industry's needs articulated in this turbulent time. Read on below for a collection of views, divided by sector:

Restaurants/pubs

"Two conflicting pressures will develop very quickly. More expensive imports and lower disposable income, especially lower in secondary consumption. [There will be an] immediate lowering of GP, covers and/hopefully or spend. The consequences to profit and cash generation are obvious as the fixed costs quick in.

"[Operators will need to] redesign of the offer and use more local ingredients, I would dare say substitutes if necessary, which will undoubtedly prop up local suppliers and their own prices.

"Tightening the grip on labour cost and making it really follow the customer flows is essential for survival. This obviously gets hard as you need to spread the available working hours between all workers to maximise their income (the probability of reducing headcount to meet minimum hours in the rest of the team is high) in order to keep retention levels high, but as possibly flows of customers become less predictable, planning is also harder, so tighter controls in the industry will be needed.

"Expansion plans need to be reassessed and the balance has to be inclined towards the more resilient London and those areas with lower consumption flexibility. The effects on the City of London are a concern.

"Fixed costs also need to be rebalanced. Business rates, landlords etc need to also have a quick reality check if their are to keep having some income in the future. We all need to quickly react to this new situation.

"Companies will have a lot of work to rebalance to be able to weather this storm. Iberica opened its doors of our first restaurant the same day as Lehman Brothers [collapsed] so we have some experience.

"On a personal note, I have in total lived over twenty years of my 44-year life in this country starting at the very early age of two when me and my family lived in Sevenoaks for five years whilst my father studied at LBS and managed one of the many businesses my family has had and invested into in this country. My first language actually was probably English as I had to readapt to Spanish on our return. Then all my summers here, last years of school, university, masters and now 10 years creating a British company, following the steps in my grandfather and father in their relationship with this country. They were the main private rail freight company linking the UK to the world, starting with oranges and vegetables from Spain. I never considered becoming a resident or citizen, except fiscally, which I as my relatives have contributed to in many different ways, because I was in Europe and thus my home.

"My heart has been torn apart."

Marcos Fernandez Pardo, managing director, Ibérica

Initially there are going to be huge worries, but I do believe it will all settle down.

The freedom of movement of people is obviously the biggest thing that will affect our industry. So many multi-nationals work within hospitality - highly skilled front of house staff, kitchen staff, back of house in big hotels, within big corporate caterers, at the airports - all those areas of catering require so many members of staff.

We already have a so-called staffing crisis in this industry, this is just going to make it so much more difficult. Lourdes Dooley, my general manager at the Hand & Flowers, has an Italian passport. She was instantly made to feel unwelcome. The vote said ‘we don't want you here'. It's not necessarily the true feeling, but that's how some of my staff feel by vote which is really unfortunate for them.

In terms of costs, I'm a little concerned how food costs will spiral. We've grown so much, we're very much working towards being sustainable, but nowhere near there yet. It's fine to say we've got British fish, but there are also other commodities like flour and oil to consider. It's the customer who will end up losing out.

Having said that, a lot of the reaction is over reaction. Everyone is thinking of worst case instead of the best. Everyone is running around with their hands in the air. No-one is making anyone feel confident or comfortable about the situation. That doesn't help. I hope it will work out of the best.

But we must bear in mind that tourists are still going to come. If the pound is even weaker, more people will come. We've still got Buckingham Palace, Blenheim Palace, the Lake District is still there, it doesn't mean people aren't going to come any more. Stonehenge hasn't gone away. But we need to make sure people do feel comfortable when they do come and that's the big job of hospitality.

Tom Kerrige, owner, the Hand & Flowers, Marlow

"We employ about 30 people and of those two are British and most from the EU. I gathered them all together on Friday morning and just said to them look we don't know what all of this means, I don't think anything is going to happen dramatically straight away. The Prime Minister doesn't leave for a few months and only then will they start the process of negotiating an exit. No government is going to chuck out all of the non-British citizens.

"I feel very sad because during my meeting with the staff, who are a terrific bunch, there was a lot of disappointment and sadness that I guess in a way they had been rejected. I appreciate there are the headlines about certain countries coming over here and not contributing to society but the fact is that the non-British individuals coming over here contribute enormously to our society and I hope they are allowed to continue to do so.

"Yes there were some people who are nervous. One in particular has lived here for seven years and he doesn't know where it leaves him. I said you are entitled to be a British citizen, you have lived here for more than five years, get the paperwork and we will help you. I think we will see an enormous increase in passport applications and naturalisation applications - anyone who has been here more than five years will apply.

"Out of fear of the unknown, I voted for Remain. But we are where we are and we have the choice of either running around in circles or accepting it and figuring it out how it will work.

"As far as the confidence of our customers is concerned it is hard to say - we have a mix, many of whom are for Brexit and many who are not. My heart did say I wanted to get out because I felt European interference had become too much, politically, but my head said don't. The decision has been made for us and we have to live with it."

Joel Kissin, owner, Boulestin restaurant, London

"On the world stage the EU acts as a ‘customs union' which imposes tariffs on food, wine and manufactured goods from most non-EU countries . Wetherspoon, for example, the UK`s biggest seller of wine in pubs, pays tariffs on most of the 95% of our wine we import from outside the EU. Eliminating tariffs on non-EU imports will be a huge shot in the arm for UK consumers, reducing shop prices and improving living standards, while acting as a catalyst for trade with the world.

"Democracy, prosperity and freedom are inextricably linked. The EU is heading down an increasingly autocratic path, which has already caused severe economic problems in most of southern Europe, and risks further contagion on the continent. Brexit is a modern Magna Carta, reasserting democratic control in the UK. It is up to UK citizens now to participate in formulating policies based on free trade with Europe and the world, an enterprise economy and sensible immigration policies, with parliamentary control. As one US president said, we have nothing to fear but fear itself. But Big Brother in Brussels is no longer in charge. The world is our oyster, provided we think clearly, debate strongly and prevent the paranoia and hyperbole of the referendum process from clouding our judgement."

Tim Martin, founder and chairman, JD Wetherspoon

Hotels

"I wasn't surprised but I was slightly shocked. From a selfish point of view it is going to give us a cheaper pound which helps overseas visitors going to Scotland and it discourages people from going overseas because of the cost of exchanging money. But on a sensible long-term level there are two impacts for us. One is the staffing element and the freedom of movement of people around Europe. And the second is the referendum in Scotland rearing its head again.

"I still vehemently believe we are still better as part of the UK. The referendum campaign in Scotland for the EU was hardly fought as opposed to England where it was hard fought. So I think that those in Scotland who turned out probably had their minds made up from the start. At the end of the day south of the border 15% of people probably changed their minds whereas in Scotland I don't think anyone changed their minds, we just were where we were.

"Our business relies on stability and continuity and the referendum result takes both of those. Suddenly continuity and consistency are out the window. And to be fair these are the reasons why I was part of the remain campaign for staying part of the union, because I felt it was important to do that."

Beppo Buchanan-Smith, owner, Isle of Eriska hotel

"The lower pound could be good for tourism. I think we should all look at our purchases as we must all make sure we buy UK products if and where we can."

Debrah Dhugga, managing director, Dukes Collection

"I have spent quite a chunk of my time over the past few years fighting for what the country voted for on Thursday and it has cost me a fair bit. I became a UKIP activist much to the absolute disgust of many. Friendships were strained (no doubt some of you hate me a little bit more today!) and at one point I even thought it might lead to the breakup in my relationship with the only person who can cope with living with me!

"However, I am no politician. Indeed most of my Kipper colleagues think I am a distinct oddball. Nor am I part of the establishment, despite my credentials - Old Rugbean and all that! I am just a simple hotelier who happens to be a passionate advocate of democracy. I write this on the one hand proud of what the country has decided, but also mindful of the fact that a very large number of British people voted for Remain. There will be as many who are disheartened by the outcome as there are delighted. And I would challenge anyone who says they are not a little bit nervous.

"But where does our country go from here?

"Whilst it primarily falls to politicians to navigate the course the country has decided it wishes to take, first in negotiating an EU exit and subsequently forging new bi-lateral relationships both with our European neighbours and the rest of the world, it is beholden on everyone who holds power and influence, however small, in whatever walk of life, to play their part."

Nicholas Dickinson, director, Congham Hall, King's Lynn, Norfolk

"Having said "Panicking is not the answer and that extraordinary united leadership was required to meet the challenges ahead with a clear vision, and a strategy to lead forward with a sense of purpose". Unfortunately the very opposite has happened, there is panic and leaders have renounced their responsibility which could even trigger a recession.

"My question to the politicians who strongly recommended 'out' is to ask: 'Did you really give Brexit serious thought? Did you really consider the consequences? Do you have a strategy to maintain economic growth and reduce unemployment?"

"The hospitality industry also requires strong and effective leadership. As the fourth largest employer supporting 4.5 million jobs and making a an enormous contribution to the UK economy there is an urgent need to be more united. The recent tipping/service charge fiasco clearly highlights the apathy and fragmentation in the industry that needs to be addressed if the industry wants to be taken seriously and have stronger representation with Government. Every company in the CBI benefits from a successful hospitality and tourism industry.

"On the positive side because the pound has taken a battering we may find more people holiday at home which would help benefit the resorts and country house hotels. Be even more engaged with staff and reduce staff turnover. Improve the image of the industry and attract more home-grown talent. Invest in training, deliver exceptional service and standards increase repeat business. Use local suppliers of food and where possible invest in food producing gardens. Explore every opportunity of sustainability and technology to save costs. As always in a crisis we often come out stronger.

"What we mustn't do is panic, when we are finally out of Europe we need to do everything possible to meet new challenges with determination, hard work and synergy, and extraordinary & effective leadership. We also should also be proud to be British."

Harry Murray, chairman, Lucknam Park

Foodservice

"Bartlett Mitchell plays an active part of the BHA who support the hospitality industry. Hospitality is the fourth largest industry in the UK and the BHA has stated it will call upon every politician in this country to do all they can to guard the strong reputation that our industry has built. It's important we all get behind this to make sure our voice is heard.

"Although it is difficult to say too much about the long term effects, as it is still an unknown, we do expect turbulent days ahead. Bartlett Mitchell meanwhile has written to all our team to ensure them of our support and reassure where we can. Bartlett Mitchell are well placed to adapt and have the ability to be agile, as an owner-led business, we can react quickly to anything that the future may throw at us."

Wendy Bartlett, CEO, Bartlett Mitchell

"There is no doubt that the UK economy will be in a state of shock for the next few weeks. However, we must not forget that the underlying UK economy is growing and will remain one of the strongest in Europe as the negotiations proceed over the next two years.

"Having been through and survived many dips in business confidence over the past 30 years, I am confident that clients will continue to invest in events that add value to their staff morale and marketing activity."

Sam Gill, CEO of the Concerto Group, owner of Create food and party design

"Last week's dramatic and unprecedented EU Referendum result caught most people by surprise, as a consequence the UK is sailing headfirst into a storm with no one at the helm. In the hours following the result, we saw the resignation of the Prime Minister, the pound went into freefall, the FTSE plunged to record low levels, investment decisions have been suspended and firms are considering moving their operations overseas. The Government must now unify and act decisively to provide clarity on the exit process, to mitigate the short term effects which could affect all sectors of commerce, including catering and hospitality.

"Smart Group is as a proud employer of EU and non EU staff and we value their contribution to the business enormously. We remain committed to all our staff and suppliers regardless of the Brexit result. Smart Group is in a good position to weather the prevailing storm and continue to thrive and grow. Following Brexit, we must continue to integrate with all our European neighbours and countries around the world, to ensure a positive outcome for everyone."

Greg Lawson, CEO, Smart Group

"As a global company, which operates within 22 EU member states, we would have preferred for the UK to stay part of the EU. However, we do not believe leaving the EU will have a major impact on our business.

"Sodexo has operated in the UK since 1988 and employs 34,000 people across the region. As a services company, most of our client relationships operate on a market by market level. We are a local player in the UK and work with local suppliers and local employees.

"The UK is the first country to decide to leave the EU, so it is unclear how this will take effect. However, we remain confident in the sustainable growth of Sodexo across all our geographies and it will continue to be business as usual in the UK."

Neil Murray, regional chairman Sodexo UK & Ireland

"The UK campaign's strategy to focus on gloom and doom associated with Brexit was a mistake. The case for improving the European Union, creating a clear concise policy directive on immigration and indeed highlighting the merits of the European Union was not made and the electorate responded to that.

From a Scottish perspective, a clear majority want to continue to link with the wider European Union and understand the need to have strong business links with the European and indeed wider community. All the options have to be considered going forward to do this.

The UK wider public voted that economic trading with EU was a secondary consideration but it is a genuine concern for Scottish business how Europe will treat the UK economically as it moves to separate from the Union. At the Royal Highland Show last week, the premier fixture in Scotland's farming calendar which contributed £46.2m to the Scottish economy in 2015, real concerns were express particularly by the agricultural sector which my business has close links to as the official caterer to the Royal Highland and Agricultural Society of Scotland. One thing is for certain, nothing feels certain right now."

David Peter, MD Saltire Hospitality

"It is very difficult to assess the likely impact of the vote to leave the EU in the short term as there is going to be a lengthy period of negotiation with not only the EU but our other trading partners.

"In addition subsidies and quotas that affect our supply chain will have to be replaced and renegotiated.

"Agreement will have to be reached on the movement of labour and border controls and I am sure many of our team members will be concerned about how this may impact on them.

"It is also not clear how the fiscal and regulatory landscape will change and how that may impact the hospitality industry.

"However our industry has had to face many changes and challenges in the past and we are nothing if not enterprising and committed so I do believe that we will all work extremely hard to try to create a bright future for our country and to secure and protect the millions of jobs our sector supports. The one thing I am sure of is that the UK economy badly needs a healthy and thriving hospitality and tourism industry.

"I sincerely hope that our politicians keep this at the forefront of their minds as they navigate the coming months and years."

Alastair Storey, chairman and chief executive, WSH

"The referendum has concluded with a very far-reaching decision that will likely impact on every business and individual in the country. Nobody can say with any certainty what the next stage will be and therefore that causes uncertainty for our client companies, and therefore for contract caterers like us too. As always, we will work with our clients to manage our way through this as best as possible and keep a keen eye on opportunities and challenges along the way."

Bill Toner, CEO, CH&Co Group

Analysis and general comment

"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 but I believe not much will change until we evoke Article 50 which there is a (small) chance may not happen.

"It's very likely, in my opinion, that Boris Johnson will step forward as PM candidate and will no doubt be a popular choice. He was a late decider on leaving the EU as I am sure you will recall and was a staunch voice in negotiating with the EU and our role within it. There is the strong possibility that the EU will try to get us back to the negotiating table (and make it difficult for us to leave) before article 50 is invoked. If this is the case, I'm confident Boris would like to draw up a new deal with them, which could see us in a stronger position and potentially even face another referendum.

Over the next few months there will be much speculation and many ideas of what will/should happen. The recruitment industry will be effected 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."

Craig Allen, the Change Group

"The UK economy will now face a period of uncertainty which is likely to be intense over the next few days and weeks, but will be ongoing for five years or so as Britain finds its new way in the world.

"Notably for foodservice, the pound will remain volatile and will trade at lower rates than over the last few years. Consumer sentiment will probably remain depressed, costs will be elevated, and there will be some uncertainty over employment because of our reliance on European labour.

"The foodservice sector will be less buoyant than it would have otherwise been - but the impact is likely to be felt differently in different areas of the business. Sectors that could benefit include tourism-related business including hotels and leisure, while restaurants, QSR and pubs could lose out. However, profitability, and therefore investment in the sector, is now under threat.

"Overall we could be facing reduced sales, increased costs and lower demand from the home market and while this could be offset to a small degree by more foreign tourists coming here due to the fall in the value of the pound, the eating out market now faces less growth than we predicted for this year and next."

Peter Backman, managing director of foodservice consultancy Horizons

"The nation has spoken and we have to live with the outcome. The great and good have already called for stability and of course we echo that sentiment.

"The Hospitality Industry has demonstrated its resilience time and again, and will I am sure, do so now.

"In the short term hospitality in the UK may prosper as the weaker pound makes us a more affordable destination and more Brits choose to stay at home - if it ever stops raining.

"Longer term a major concern has to be for our workforces given that we have a long history of recruiting from Europe.

"Most importantly the Government and those involved in negotiating our future place in the world must bear hospitality in mind. When measured by numbers employed, tax take, and contribution to GDP ours is a major Industry."

Peter Ducker, chief executive of the Institute of Hospitality

"The EU referendum question represented a profound moment for the future of our industry. Hospitality and tourism benefits from a flourishing economy and any level of uncertainty will have an impact. The United Kingdom's withdrawal from the European Union is the beginning of a process which could take years.

"On Monday 27 June the British Hospitality Association is convening its members, industry and political leaders to discuss economic and political ramifications in the short term. We will be framing a plan to ensure that we have a seat at the table on all negotiations including taxation, immigration and regulation.

"As we go through this process, the BHA will call upon every politician in this country to do all they can to guard the strong reputation that our industry has built representing a hospitable and welcoming country all around the world. Our industry is one of the key drivers of exports, prosperity and the fourth largest employer supporting 4.5 million jobs."

Ufi Ibrahim, chief executive of the British Hospitality Association (BHA)

"In the lead-up to the referendum, Boost Capital saw a rush of SMEs applying for bridging finance, anxious about what the vote might mean for their businesses in the short-term, and, vitally, their cashflow. Unfortunately, that uncertainty looks set to continue, as we wait for markets to react to the Brexit news, and the economy experiences the after-shocks of this dramatic change of course.

"Should the pound fall by as much as a fifth in value, as predicted by many, those buying goods overseas will suffer, so importers will expect to see their overheads increase. For them, the best option is gauging if sterling will fall further, then securing forward contracts to fix the costs of international money transfers - if this hasn't already been done. Again, short-term borrowing to cover these inflated costs may also be necessary. On the flipside, there could be benefits for exporters in a weakened pound. Today, Britain's products look better value than a week ago, so canny exporters will take advantage of this by being quick to market themselves aggressively to foreign customers."

Alex Littner, managing director, Boost Capital

"The EU referendum will, in time, prove momentous. However, for the moment, business will and must continue as normal. In the months ahead, while the impact of the decision unfolds, the ALMR will work closely with the Government and its agencies, to protect the commercial interests of our members. We are reassured to hear from the Governor of the Bank of England that he is fully prepared to back the UK economy and support British business and that clear messages should reassure consumers, investors and operators.

"While the uncertainties that will result from the referendum's outcome are unwelcome, the fact is that the UK has spoken about an issue that it holds close to its heart. From here, all parties must move forward in a manner that best serves the UK's citizens - our teams and our guests as well as our businesses, including the pubs, clubs and restaurants that remain at the heart of our society."

Kate Nicholls, chief executive, Association of Licensed Multiple Retailers (ALMR)

"We believe that London and the UK remain an attractive investment environment. There is sure to be some short term instability but the strong fundamentals remain and the UK will continue to attract investment. We see no reason why London shouldn't remain the most attractive City in the world for property investors. We believe that leisure businesses will remain attractive. There may be short term weaknesses in consumer confidence but we expect the investors to remain bullish about the UK.

"Slightly weaker sterling may attract foreign investors to further invest into London"

Mark Sheehan, managing director, Coffer Corporate Leisure

"It is vital that the Government acts quickly to secure economic stability and protect consumer confidence. We will be vigilant to ensure the Brexit negotiations do not harm our exports abroad and the competitive position of beer and pubs in Britain."

Brigid Simmonds, chief executive, British Beer and Pub Association (BBPA)

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