BREXIT

'Intense uncertainty' on the cards? Eating-out sector responds to Brexit vote

By Daniel Woolfson

- Last updated on GMT

‘Intense uncertainty’ on the cards? Sector responds to Brexit vote

Related tags: Small business owners, Small business, Britain

Pubs and restaurants could be facing reduced sales, increased costs and lower demand now that Britain has voted to leave the European Union, a leading analyst has warned.

The economy is set for an “intense” period of uncertainty that is expected to last for approximately five years, according to Peter Backman, managing director of food service analysts Horizons.

He said: “Notably for foodservice, the pound will remain volatile and will trade at lower rates than over the past few years. Consumer sentiment will probably remain depressed, costs will be elevated and there will be some uncertainty over employment because of our reliance on European labour.”

The foodservice sector would be less buoyant than it would have been otherwise, but the impact would most likely be felt differently in other areas of the business, he said.

Pubs 'could lose out'

“Sectors that could benefit include tourism-related business including hotels and leisure, while restaurants, QSR (quick-service restaurants) and pubs could lose out. However, profitability, and therefore investment in the sector, is now under threat.”

While reduced sales, increased costs and lower demand could be offset to a small degree by more foreign tourists visiting due to the fall in value of the pound, the eating-out market would now face less growth than predicted for this year and the next, he added.

However, prolific investor Luke Johnson, a prominent advocate of Brexit, said it was important not to overreact with knee jerk responses. 

"Arguably the sector has become overheated and for example, a reduction in rental inflation would be welcome. Inbound tourism should grow apace. The medium term impacts will not be as material as the gloom merchants predict. Britain remains the world's 5th biggest economy and business should seize this opportunity to trade more with the world outside the EU," he said.

It was important for small business owners in the pub sector not to panic, added Ian Cass, managing director of the Forum of Private Business. 

He said: “The British people have made their decision and - rather than focusing on division and recriminations - we now need to get on with business. Inevitably there will be a period of uncertainty and the first thing we need from our leaders is a calm and measured response that builds confidence and a positive view to move the economy forward.

In terms of the pub trade, he said: "The pound means tourists visiting the UK will have more money in their pocket, which could be good for pubs. And I have a feeling pubs will be very busy tonight."

He recommended licensees worried about the ramifications of Brexit should keep an eye on their cash flow and stay in control of finances as well as reassuring employees and conducting business as usual. 

'Historic event'

Cass added: "The UK has made its decision and we can now move forward from this historic event in a positive and proactive manner. Small business must play its part, but what is clear is that we need some fresh and innovative thinking to ensure that Britain’s small businesses continue to innovate, grow and increase their productivity something the forum and its members will fully engage with.”

Mike Cherry, national chairman of the Federation of Small Businesses, called on the Government for clarity on what the decision to leave the EU actually meant for the UK's businesses.

"The events of the past 24 hours have been momentous and the effects have already been seen on the markets. Clearly the EU referendum debate has been contentious, but we now call on the Government and all parties to bring stability for the business community," he said.

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