Notwithstanding current legal challenges that could stop her from triggering Article 50, Prime Minister Theresa May pledged at last month’s Conservative party conference in Birmingham to begin negotiations to leave the European Union by the end of March next year.
Whether they voted leave or remain, many in the hospitality sector have voiced concern over the decision to trigger negotiations so quickly.
The go-slow message that the industry was keen to communicate has gone unheeded by a government whose political motivations, which include controlling immigration, look to have outweighed the economic impact that a ‘hard Brexit’ strategy may unleash.
Following the initial referendum result in June, Peter Backman, managing director of analysis firm Horizons, predicted in Better Wholesaling that the price of imported goods would rise, and that there would be uncertainty over investment and employment, particularly in foodservice. Four months on, and this forecast is becoming reality.
In September, PepsiCo issued a briefing to wholesalers detailing price rises of between 3% and 8% across a range of health, premium and impulse snacking products, citing Brexit as the cause.
Last month, the high-profile ‘Marmitegate’ spat occurred between Unilever and Tesco after the supplier announced a 10% price hike across household brands, blaming the fall in the value of the pound. The companies eventually settled, but consumers should still brace themselves for further rises.
Indeed, Brexit was the subject of a recent Arena Face to Face discussion. Panellist Phil Sermon, MD of restaurant chain Vapiano, said: “Some suppliers have already told us that prices will go up once the UK is out of the EU, and that isn’t an idle threat. There will be an EU price and a non-EU price which will be higher.”
Already, the British Retail Consortium has urged the government to focus on lowering import costs alongside avoiding any increase on tariffs before the process gets underway.
The most pressing concern for hospitality, however, is around the free movement of labour, and the impact any sudden change in government policy might have.
Being the fourth largest industry in the UK, with 4.5m employees, the British Hospitality Association (BHA) says a conservative estimate puts the number of EU nationals working in the sector at around 700,000.
“Politically, the government will find it difficult not to take a hard line on immigration, and the risk is that they see our industry as the opportunity to make their gain,” says BHA chief executive Ufi Ibrahim, adding that the hospitality industry may be “pushed to a cliff edge” if it isn’t given a 15-year period to address social mobility and to invest in the development of skills to plug the shortfall.
For foodservice wholesalers and suppliers, for whom restaurants, cafés, pubs and hotels are their lifeblood, the knock-on effect could be disastrous.
Ranjit Mathrani, chairman at MW Eat, a London-based Indian restaurant group, adds: “A hard landing on the employment side will see businesses close down because of high billing in costs and wages. High-margin businesses such as hotels might be able to afford those increases, but for low-margin businesses, it will be survival of the fittest, and many will go to the wall.”
While trade associations now consolidate with members and prioritise which aspects of government strategy and legislation they seek to influence, BHA’s Ibrahim believes there is a way every business can help to future-proof the industry. “We engage our members in being our grassroots campaigners, to inform and educate MPs on the value of their businesses in their constituency,” she says.
By making MPs aware of how many people a business employs and what impact it has on the local economy, there is an opportunity to inform government about concerns and opportunities going forward.
If people power dictated that Britain should leave the EU, then people power can also help shape the future of a strong and thriving industry.