12 March 2019
With less than a month to go before 29 March, the question is: are businesses within the hospitality industry ready to face the Brexit tidal wave? In percentage terms, businesses have about 2% left of the time they have had to prepare for the unknown! However, doing nothing is still not a good strategy. In this article we explore the impact on Brexit on food and drink, and the resulting potential impact on the sector.
It’s thought that food and drink prices will increase post Brexit - the question is by how much. The leaked government report paints a bleak picture. The predictions are that tariffs, both incoming and outgoing, will be around 13% in the event of a “no-deal” Brexit.
With about 30% of our food imported from the EU, and the possible increase in tariffs, the cost of meals being prepared and drinks consumed in restaurants will increase by approximately 4%, assuming no increase in prices of UK produce or produce from outside the EU.
Businesses will naturally try to pass these costs on to consumers, and, as a result, consumers will probably reduce their frequency of dining out. With the UK’s restaurant industry already at crisis point in terms of customer footfall, many businesses may not be able to stay afloat with the double whammy of weaker demand and increased overheads, such as the living wage and rent and rates.
To mitigate the Brexit risk, some businesses are looking at alternatives such as purchasing UK products from UK suppliers, substituting what they would have previously imported. However, we will need to employ more staff to be able to meet this demand (as per the statistics above, the UK imports 30% of the products consumed from the EU). The seasonality of produce means most of the labour force employed for this type of work is from the EU, which leads us into the other major Brexit issue: people.
So, what can hospitality businesses do? Until we have clarity on the terms of the Brexit deal, businesses need to lobby government through relevant organisations, like the Food & Drink Federation, which acts as the ‘voice’ for food and soft-drink manufacturers operating in the UK, for greater clarity on trade and customs arrangements.
With Brexit just around the corner, we need to find a solution to reduce the disadvantages and disruption to prevent more strain on an already suffering sector.
If you have any queries or would like to discuss this issue further, please contact your local UHY adviser. Alternatively, fill out our contact form here.
References:
Department for Environment, Food and Rural Affairs
National Statistics, Food Statistics in your pocket 2017, Global and UK supply
