State of play - January 2020
After the Conservative Party secured an 80-seat majority in the 12 December 2019 general election, Boris Johnson’s Brexit deal navigated its first parliamentary hurdle on 20 December, passing the House of Commons with a 124-vote margin.
The success of the Withdrawal Agreement bill set the UK on a course to leave the European Union on 31 January and enter a transition period until 31 December 2020.
However, a matter of days before the planned January departure date – the Prime Minister suffered a series of defeats in the House of Lords after peers approved amendments including plans for the estimated 3.6m EU citizens living in the UK to be given physical proof of their right to stay after Brexit.
Yet, while this instigated a second reading of the Withdrawal Agreement bill in the House of Commons, the Prime Minister asserted that the UK had “crossed the Brexit finish line” on 22 January after MPs passed legislation rejecting the Lords’ amendments and implemented the bill.
Subject to a meeting of the European Parliament on 29 January to debate the terms of the UK’s “divorce”, the UK will now enter a transition period as planned during which negotiators will work tirelessly to thrash out the details underpinning a future working relationship and the UK will follow the same rules as an EU member state – including freedom of movement.
Once the transition period ends, the UK will leave the EU on whatever terms agreed during the transition period underpinned by the terms of the Withdrawal Agreement.
Rise of British wine
In January 2019, Vicky Bullen, CEO of brand design agency Coley Porter Bell, pondered whether Brexit could finally herald the mass acceptance of British wine both at home and abroad.
“Each year we’re seeing more and more British wines winning global awards, with Ridgeview – the UK’s largest winemaker – receiving the coveted trophy of Winemaker of the Year in November 2018, in the prestigious International Wine & Spirit Competition,” she said. “They could still punch much higher.”
Time to stockpile?
Alongside news that the Wine & Spirit Trade Association had predicted a no-deal Brexit could see wine tariffs rise by more than £100m per year for importers, MA reported a number of the UK’s biggest suppliers had begun stockpiling.
In March, MA revealed that Direct Wines was poised to bring in an extra 2m bottles – roughly a 40% increase – while Bibendum said a “robust Brexit” plan had been enforced and would see it ordering more wine. What’s more, Majestic bulk-bought 1.5m more bottles of EU wine as part of its emergency planning in 2018.
The stockpiling didn’t stop there, with pubco Marston’s revealing in May that it had hoarded around £6m worth of Spanish lager Estrella Damm amid concerns over a no-deal Brexit.
Continental opportunities
In a financial statement for the year ending 30 March 2019, the operator of hostels, bars and pubs across 10 cities in seven countries, Beds & Bars, revealed that, given disruption caused by Brexit, investment in other parts of Europe presented enticing opportunities.
“In the wake of Brexit and other political uncertainties, the UK has continued to put pressure on businesses, particularly in the hospitality sector,” a statement read. “In light of the UK’s current economic state, it is much more attractive for us to invest in other parts of Europe at this current time.
“Despite these hurdles, the group has demonstrated a strong financial performance in the 2019 financial year and we are con dent this will continue into the new financial year.
“Beds & Bars will continue to search for further opportunities in the UK and Europe and is set to have a positive year.”
Minimising disruption
Discussing the beginning of the UK’s Brexit transition period, UKHospitality chief executive Kate Nicholls commented: “Over the course of the transition period, all eyes will be on the Government to see whether it can wrap up a free trade agreement before the end of the year.
“The hope is that it will, in order to minimise the potential for disruption.
“The biggest Brexit-related challenge for many pubs is going to be around recruitment following the end of the transition. We are awaiting detail on the points-based system that will be introduced, but there have already been positive signs that a salary cap will not be introduced. For those pubs that do need to bolster their home-grown teams with workers from the EU, there should still be the opportunity to do so.
“Arguably, the major challenges which pubs continue to face are non-Brexit ones such as continually-rising property costs.”
Return of battery hens?
Speaking in March, ‘eggsperts’ from the British Egg Industry Council (BEIC), the RSPCA and Compassion In World Farming (CIWF) predicted that a no-deal Brexit risks return of battery hens within two weeks. The bodies reacted angrily to the Government’s refusal to add eggs and egg products to the list of foods protected by tariffs in the event of a no-deal Brexit.
Economic hit
A number of Bank of England scenarios were used to predict how the dining sector would fare in a ‘disruptive’ and ‘disorderly’ no deal scenario, which looked to be the most likely outcome at the time given the then expected exit date of 31 October 2019.
MCA reported in August that a disorderly no-deal Brexit could reduce the value of the eating-out market by up to £5.4bn.
Only certainty is uncertainty
While Shepherd Neame’s total worldwide export sales are less than 2% of turnover and an overall proportion of EU nationals employed by the company is less than 10%, Brexit is an ongoing consideration for the Kent-based brewer, according to chief executive Jonathan Neame.
“We can only do what we can in terms of taking a bit of warehousing space, buying forward a bit of foreign currency, trying to manage our supply chain as effectively as possible, but there are certain risks that are outside of our control,” he told MA in September.
“The only certainty these days is that there is uncertainty – it’s the new norm and you have to deal with it – if it’s not Brexit, it’s something else.”
UK economy better off
Discussing Brexit in November as part of a trading update for the 13-week period up to 27 October 2019, JD Wetherspoon chairman Tim Martin said: “The company is frequently asked by shareholders, customers and the press for comments on Brexit.
“The UK economy will be better off on the basis of ‘no-deal’ rather than the deal proposed by the Government.
“We continue to anticipate a trading outcome for this financial year in line with our previous expectations.”
Stakes have been raised
Commenting on the potential impact of a no-deal Brexit on both his company and the broader pub trade in September, City Pub Group executive chairman Clive Watson said: “The stakes have been raised and we’re probably going to end up with a no deal, or something very close to remain.
“If it’s a no deal, regardless of what people say, there will be massive disruption to things like the food supply chain and clearly that’s going to affect not just our sector.”
Immigration and hospitality staff
“For the industry up until now there has been some degree of uncertainty on what will happen upon Brexit, particularly on staffing levels and a new immigration system,” a spokesperson from the British Beer & Pub Association explained.
“Our members employ 17% of their workforce from overseas, rising to 40% in metropolitan areas, which means our members do need access to skills.
“Right now, pubs are facing a serious skills shortage and clearly need access to talent, both domestic and from abroad. It is vital that any future immigration policy recognises this, ensuring that the great British pub continues to thrive for both locals and visitors.”
British Institute of Innkeeping chief operating officer Steven Alton added: “The uncertainty that Brexit has brought to the economy has meant that some of our members have felt unable to plan effectively for the future. Their biggest challenge over the transition period will undoubtedly be the attraction and retention of staff, but we feel confident in the ability of hospitality businesses to shift and adapt to their circumstances.”
Trouble employing overseas staff
Discussing the repercussions of Brexit on staffing at Three Cheers Pub Company in September, cofounder Mark Reynolds said: “Brexit, dare I say it, has definitely made an impact, even though it hasn’t happened yet, people aren’t coming over. So we’re spending more on recruitment. Once upon a time, you would put an ad on Gumtree and get lots of CVs, now we’re lucky to get a couple.
“We’re having to spend more on advertising in more channels so it costs a lot more, but it’s also time consuming.”
Stonegate Pub Company chief executive Simon Longbottom told MA in October: “I can give you Stonegate’s views, not mine. Mine are unprintable.
“Ultimately, our customers aren’t eating or drinking differently because of Brexit, and anyone in the sector saying differently is kidding you, I don’t believe it,” he said.
“Are we concerned about any particular areas? The biggest concern for me is immigration and the link to employment. I don’t hear any decision makers talking about the lower pay sector, or the more flexible working that hospitality and other industries offer.”
Pub issues overlooked
I
n conversation with MA in October, then British Beer & Pub Association (BBPA) chief executive Brigid Simmonds stated that with a host of issues – including Brexit – hogging the parliamentary timetable, she was concerned that the key issues affecting pubs, including deposit return schemes and putting calories on menus, may not get the attention they deserve.
“That’s a worry for anyone who works with the Government at the moment,” she explained.
“I will say that we had our Long Live the Local drop-in and had 34 MPs turn up on the day – and it was a really important day in parliament – so they are supportive. But in legislative terms, there are some things I’m worried about.”
After succeeding Simmonds as chief executive of the BBPA in November, former MEP Emma McClarkin – who described herself as a “very happy Brexiteer” in an interview with Politico in August 2018 – told MA: “My priority, come Brexit, is to make sure when that cacophony of noise is going off, our voice from the industry really cuts through.
“My job is to understand what we are doing right now and to navigate this period of political change we are seeing, not only with a general election coming up and any Budget that will be coming in the new year.”
Consumers finding confidence
Speaking to MA in December, Oakman Inns’ CEO Peter Borg- Neal predicted pubgoers would be more confident with a “clear direction of travel” over Brexit.
“We have maintained our corporate momentum despite an unhelpful environment with the uncertainty around Brexit impacting both consumer and investor confidence,” he explained.
“We believe that the post-election period will bring some momentum into the economy and we expect the new Government will keep its promises with respect to a root-and-branch reform of business rates.”
Line drawn under uncertainty
Discussing the result of the December general election, UKHospitality chief executive Kate Nicholls said: “A majority means we begin to draw a line under the uncertainty we have felt over the past few years.
“The priority for this Government will be to secure the best Brexit possible and the sooner it does that, the sooner it needs to fulfil its election promises to business.
“We want to see the promised reduction in business rates delivered at the earliest opportunity. The new Government must also support business in delivering employment and an increase in skills and opportunities across the board.”
Leaving a ‘no brainer’
“Businesses are always subject to the ups and downs of the economy, in or out of the EU,” JD Wetherspoon chairman Tim Martin said.
“That said, Brexit offers great opportunity. The EU is highly protectionist, imposing tariffs on about 13,000 non-EU imports. The UK Government can end these tariffs and reduce buying prices for many products pubs and the public buy including rice, coffee, oranges, and children’s clothes and shoes.
“There will be no loss of Government tax revenue since the tariff income is currently collected by the UK Government and sent to Brussels. The UK can also regain control of fishing, giving an important financial and morale boost to coastal communities. We will also end contributions to the EU cutting taxes or boosting spending in the UK with the money saved.
“Above all, we can increase democracy, the biggest predictor of economic success. In the past 100 years, an increase in freedom and democracy has always coincided with economic progress. Look at Japan, South Korea and Singapore, for example, once they became democratic.
“The EU is becoming increasingly undemocratic with unelected presidents, a court (the European Court of Justice) which isn’t subject to democratic control and MEPs who can’t initiate legislation.
“The EU has also created a currency that isn’t backed by a government, creating economic chaos in southern Europe – Greece has been devastated and even Italy has had no growth to speak of for 20 years.
“Publicans are understandably worried about excessive controls on immigration and I agree – but two thirds of immigrants last year came from outside the EU – and we need a sensible policy for EU immigrants too. I will campaign for a liberal policy as we have for immigration from Ireland.
“In the round though, democracy works and leaving the chaotic and undemocratic EU is a no-brainer.”
