The biggest danger facing Britain’s hospitality industry, post Brexit, is the potential clamp-down on migrant labour to this country. But Brexit should not be feared, say Bob Cotton and Miles Quest.
Brexit, looming on the horizon, is catching the UK hospitality industry on a decade-long roll. Cheap money had led to a remarkable upsurge in the construction of new hotels and other hospitality establishments. At the same time, a prolific supply of EU migrant labour has enabled the industry to experience more than a decade of unadulterated growth.
Migrant workers, willing to accept the national minimum wage, have kept wage ratios firmly in check. And now, the weak pound Brexit’s very own beneficial wind of good fortune is encouraging more overseas visitors to the UK than ever before. UK hospitality could hardly be in a better place.
But is this favourable scenario lulling the industry into a sense of false security? Cheap money and cheap labour have encouraged too many businesses to give too little thought to a future in which there will be fewer and far more expensive workers.
Undeniably, wage costs are already on the increase as the National Living Wage rises to £9 an hour by 2020; new pension arrangements are an additional expense. Energy, rates and food costs are all rising. A decline in domestic consumer spending is being forecast.
On top of these increases and development s will come a reduction in the availability of migrant labour once Brexit comes into effect in 2020. Here’s the rub. Hospitality is dependent on the supply of migrant labour. Any reduction in that supply will be serious and far reaching.
Government thoughts are clearly (and rightly) turning to the introduction of work permits. The British Hospitality Association claims that hospitality will need 100,000 work permits a year post-Brexit a not unrealistic figure. But even a vague admission by present government ministers that work permits might be a way forward has yet to be tested and key decisions have still to be taken about the skill levels of workers allowed in.
There is little evidence to suggest that the government would agree to the large number that hospitality is claiming when there are competing, and maybe bigger, claims from the care industry and NHS, retail and agriculture in particular.
The impact of this will be financial. Post Brexit, because fewer migrant workers will be available, average wage rates are likely to rise well beyond the present government’s proposed increase in the National Living Wage to £9 an hour by 2020. As so many hospitality workers (how many – 20 percent? 30 percent? More?) are at or even below the current NLW wage level, the industry will find payroll costs under severe pressure.
The ready availability of migrant labour and low rates of pay has discouraged many employers from sharpening up their act in the past. Only if productivity can be raised if fewer people do more work, at better rates of pay can service standards be protected and wage costs be contained. Low productivity remains the industry’s Achilles Heel.
Yet, while Brexit poses a great danger, it also offers opportunities.
Providing sterling stays at realistic levels and prices remain competitive, Britain will continue as one of the world’s most attractive tourism destinations. Brexit won’t change that. Britain’s standards of food and hospitality are now high and rising; this will not change. When largely unhampered by EU oversight, the UK government will be able to implement desired changes in labour and food regulations, competitive tendering and other key issues that increase business costs.
Comparison with EU VAT rates will continue to rankle though they are still unlikely to change.
Post-Brexit, businesses will find they have to organize their more expensive workforce more smartly, ensuring that they take full advantage of technology and automation (admittedly, difficult in a service industry). Placing greater emphasis on training and developing staff- apprentices, in particular – is a must as is making a career in hospitality more attractive for British-born youngsters in terms of total working conditions – not just pay; unforgivably, this is a challenge the industry has signally failed to meet for the last 50 years.
In a post-Brexit world only two years away those businesses that plan for a lean staff, highly trained, high-wage hospitality economy will be the wisest and the most successful. It’s not too late to plan for this now.
Article by Bob Cotton & Miles Quest