Brexit analysis: "What happens now?"

Immigration was a key factor in the Brexit debate. Some ‘leave’ campaigners focused their attention on Britain’s perceived inability to control immigration within the EU.

But migrant workers are vital for the pub industry. The British Beer and Pub Association (BBPA) estimated there are 100,000 EU nationals working in the sector, or one in six employees.

Mark Robson, managing director of multi-site operator Red Mist Leisure, said the result had been unsettling for his European staff. He told The Morning Advertiser​ (MA): “I have been asked multiple times by staff, ‘What happens now?’

“It’s hard to predict whether a stop or restriction on migration will put pressure on the labour market for the hospitality industry, which is so reliant on European workers.”

End uncertainty

Trade bodies have called on the Government to end the uncertainty for existing EU workers in Britain. Association of Licensed Multiple Retailers (ALMR) chief executive Kate Nicholls said guaranteeing the right of EU nationals to stay and work must be a priority for
the sector.

Robson is optimistic the terms of Brexit will not force existing employees to lose their jobs.

“While there are no guarantees they will be able to remain, we all know it is highly likely they will be granted indefinite leave to remain,” he concluded.

But if the Government does grant current EU workers the right to stay, questions will still need to be answered about the impact on the future supply of labour once the Brexit process is completed.

Robson speculated that if migration was capped, a points-based system could still allow pubs to recruit skilled workers from abroad in future.

Well-being of staff

Peter Linacre, managing director of London-based New Pub Company, said an interruption to migrant labour supply would be “problematic”, but his focus was on the wellbeing of existing staff. “My concerns continue to dwell more on the outlook for those of our staff, and for the whole industry, who come from EU countries and have already experienced instances of ill will,” he explained.

Clive Watson, chairman of City Pub Company, which has pubs across the south of England, also reported concerns among his European employees, some of whom have worked in the UK for years.

Following the Brexit vote, he emailed all staff to reassure them, and believes ministers should also give guarantees.

“We are proud to have pubs that are diverse and also diverse nationalities working in them. By sharing cultures and ideas I believe our pubs become vibrant, exciting and successful,” he said.

Economic uncertainty

Discussions immediately after the Brexit vote focused on the economy. The pound plummeted to its lowest value against the dollar for 30 years, sparking fears of a recession.

BBPA’s chief executive Brigid Simmonds admits political and economic uncertainty seems “certain to have an effect on investment in the pub sector in the short term”.

Last month, following the referendum result, Revolution Bars Group terminated discussions regarding a proposed £16m acquisition of
four bars in Edinburgh.

It said: “In light of the market uncertainty following the referendum result, those discussions have been terminated and the group will not be proceeding with the proposed acquisition at this time.”

Helping hand

Simmonds called on the Government to reconsider planned uplifts to the national living and minimum wages in the wake of Brexit.

“Regardless of the EU vote, planned changes to the national minimum wage, which will cost the industry £35m this year, living wage, and measures such as the apprenticeship levy, business rates revaluation and auto-enrolment of pensions for SMEs, all present challenges to further investment.” 

Ex-Chancellor George Osborne reacted to Brexit by pledging to cut corporation tax to below 15%, five percentage points lower than the current rate, to encourage investment in the UK.

And markets have eased since the initial reaction, with the terms of Britain’s exit from the EU yet to be revealed following the appointment of new Prime Minister Theresa May.

Though admitting the move hadn’t reversed damage to consumer confidence, Simmonds said she hoped May’s appointment would provide much-needed economic stability.

By contrast, Red Mist’s Robson said he doesn’t expect the economy to be rocked to the extent ‘remain’ campaigners predicted.

Pound to strengthen?

After initially dipping dramatically, FTSE 100 and 250 indexes returned to pre-Brexit levels.

“Sterling has taken a bit of a hit against the major currencies. Is this a bad thing? Possibly not,” Robson said. “Certainly good for exporters, and I suspect the pound will gradually strengthen again over the coming weeks and months.”

Karen Errington, licensee of the Rat Inn, Anick, Northumberland, vented her fears of a future staff shortage, but speculated the falling price of the pound could encourage tourism to the UK and boost footfall.

ALMR’s Nicholls echoed her optimism. “A possible influx of foreign visitors, combined with the potential for an increase in the number of staycations, may have a positive knock-on effect for pubs and bars.”

‘Dire warnings’

Undoubtedly one of the industry’s fiercest Brexit campaigners was JD Wetherspoon founder Tim Martin.

Martin produced thousands of pro-Brexit beer mats, visited hundreds of pubs to convince drinkers to vote leave and donated £200,000 to the ‘leave’ campaign.

He said the pubco’s recent buoyant financial figures, a reported 4% increase in like-for-like sales in the 11 weeks to 10 July, with total sales up 3.8%, indicated the ‘remain’ campaign’s predictions were inaccurate.

He described the individuals and organisations responsible as “either dishonest, or they have a poor understanding of economics”.

He added: “In spite of the dire warnings, Wetherspoon’s trade strengthened slightly in recent weeks and we consequently anticipate a modestly improved outcome for this financial year.”

VAT campaign

On the flip-side to the JDW founder, Oakman Inns managing director Peter Borg-Neal was a committed ‘remain’ supporter. He argued the UK could be heading to a recession due in part to a weakening in consumer confidence.

This fear was echoed by New Pub Company’s Linacre, who said uncertainty would “weigh heavily” on people’s wallets.

Borg-Neal also relayed fears on Brexit’s impact on food and wine imports, and argued that something needed to be done to negate any damaging impacts.

He explained: “It makes no sense to sit around waiting for events to unfold. Individually, and collectively as an industry, we need to ensure we are proactively shaping the future.”

He called on a united campaign to influence the Government to reduce VAT. “The VAT cut to 15% for 13 months from December 2008 was hugely beneficial at a time when the economy was in recession. Such a cut would be very welcome now,” Borg-Neal said, adding that a permanent VAT cut down the line would be preferable.

Theresa May

Senior trade figures have called on new Prime Minister Theresa May to ensure the hospitality sector doesn’t suffer as a result
of Brexit.

The Association of Licensed Multiple Retailers’ Kate Nicholls said: “The new Prime Minister will set the tone for the UK’s approach to the EU negotiations and we are pleased she has sent a clear signal that nothing will be rushed and no steps will be taken until we know what is needed.

“She must ensure the needs of sectors like hospitality and small businesses are taken into account – simple access to the single market, the ability to hire the right people and driving down costs and burdens of regulation.

“Above all else, we call on Theresa May as one of her first acts as the new Prime Minister, to guarantee non-UK EU nationals, many thousands of whom work in our pubs, bars, hotels and restaurants, to be granted the right to remain in the UK both before, during and after the negotiations. We need a clear Brexit employment strategy.”

BBPA

The British Beer and Pub Association’s Brigid Simmonds added: “The forthcoming Brexit negotiations still present considerable concerns to both business and consumer confidence.

“It is vital that, in the short term, the Government looks at some of the regulatory costs already in the pipeline – from the national minimum wage and living wage, through to business rates revaluation, the apprenticeship levy and auto-enrolment of pensions for SMEs.

“In the longer term, balancing free movement and free trade is not going to be easy, and we need to ensure that the competitive position of beer and pubs in Britain is protected throughout negotiations.”