17 January 2017
As the Government moves towards triggering Article 50 for the withdrawal of the UK from the EU we ask – what’s in store for the UK hospitality sector in 2017?
According to Jamie’s Italian Restaurants, Brexit has already had an impact, with the announcement of the closure of six sites in early January: “As every restaurant owner knows, this is a tough market and, post-Brexit, the pressures and unknowns have made it even harder,” said Simon Blagden, Chief Executive.
Other restaurant casualties have been Ed’s Diner, which went into administration in October last year, and Burger & Lobster, who recently reported losses of £7m, with “growing concern” after the failure to meet debt covenants. This is at odds with stats from the Office for National Statistics, which showed the economic index for hotels and restaurants up 1% in the quarter following the Brexit vote.
We suggest something else is going on, not just the Brexit effect, in the fast-casual dining market, in that we are possibly approaching saturation point. How many different pizza and burger offerings can the market supply?
Clearly the Brexit weaker pound will continue to have an impact on restaurants which continue to import products from abroad. Those that can be more flexible in their offering could source more local food and ingredients – don’t be surprised if we see a resurgence of “Best of British”. The challenge for operators will be: How much of these input cost rises will they be able to pass on to customers?
The other major Brexit effect for the hospitality sector will be recruitment, and the potential shortage of talent and staff, given the uncertainty for EU nationals in a post-Brexit UK. Both hotels and restaurants in the UK are reliant on a flexible labour market, made up of a substantial number of EU nationals. Surely the Government will not want to threaten the success of the hospitality sector in the UK, and so will protect the status of EU workers, encouraging hospitality employment from the EU post-Brexit?
The one positive is that the weaker pound should see an increased number of tourists to the UK in 2017, particularly from the US and China. This should help maintain occupancy levels at hotels and restaurant covers, especially in London.
The only thing we can be certain about is that there will be uncertainty until the negotiations commence and a clearer path is laid out. It will be interesting to see how things turn out for hospitality in 2017 – we will of course keep you updated.
How can we help?
In this fast-moving industry, we understand how difficult it can be to keep abreast of the latest developments, whilst managing the everyday running of your business. As specialist accountants to the hospitality sector we can help you to stay ahead of the game, and work proactively with you to help you achieve success.