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Why Your Favourite Pizza Will Cost More After Brexit
KIS Finance
Whilst the current uncertainty created by the on-going Brexit debate is likely to have a wide range of effects on everyday life in the UK, the cost of eating out is definitely set to increase.
With the average Brit spending £4,000 a year on dinning out, in comparative terms this is over twice as much as families spent in the 1970's, the restaurant trade in 2017 is big business.

The UK restaurant industry relies on European workers

With over 2.1million EU workers in the UK hospitably trade, primarily in front of house roles, any change to their right to live and work in the country will have a major impact on the sector.  The reliance on EU staff in restaurants has increased markedly, rising by 46% over recent years and it is estimated that over 1.3 million staff would need to be recruited into the sector between 2014 and 2024 to keep pace with demand. This is huge!

Whilst the Prime Minister continues the debate on whether to confirm the position for current EU citizens living in Britain, the ongoing uncertainty means that many may choose to leave the UK.  Certainly, far fewer EU workers will currently be arriving in the UK than in recent years, a position set to remain until the current situation is resolved.

 

Since the Brexit vote the UK is very much less attractive to workers from mainland Europe

Due to the increased strength of the Euro against the pound, there are already less European workers making the trip to the UK. Many people who come from mainland Europe to work in the UK, in particular Eastern Europeans, do so to send money back home. The stronger Euro means that these workers have less money to send home, basically in real terms they have experienced a 20% pay cut since the Brexit vote.    

On a trip to Brighton a few months ago, I personally experienced restaurants who were having significant staffing problems. One restaurant, that is part of a large Italian restaurant chain, had about a third of their tables sectioned off as not in use plus a restricted menu, all due to staff shortages.

 

Why are restaurant staffing problems likely to get worse?

Should the future involve a similar set of criteria currently used to determine eligibility for non-EU overseas workers, those in hospitality are likely to find themselves as regarded as too low skilled to be eligable for worker status.

So what does this mean for restaurant goers?  Given the current low levels of unemployment, alongside the demographic pressures of an aging workforce, the ability to attract UK staff into the sector will be limited.  Therefore we are likely to see an increase in wages, which will be necessary to attract staff away from other sectors.  This is turn may see these additional costs passed onto the customer as restaurants strive to remain viable businesses.

 

What will an increase in the National Minimum Wage mean for restaurants?

The proposed increase in the National Minimum Wage, set to rise to £9 by 2020, will add further pressure into an already stretched sector.   Whilst the underlying principle of raising the standard of living for UK workers is widely endorsed, the reality of the situation has been a levelling of the playing field between low paid sectors.  Therefore restaurant businesses will need to pay in excess of this level if they are to attract staff from other sectors, adding further pressures onto businesses which will have to be met.

 

Rising food prices is also impacting the restaurant industry

As a nation we import over half our food, including that used in restaurants.  Following recent food price increases, directly linked to a post Brexit vote weakened Stirling, an estimated further 3.4% increase in food costs is expected in 2017.

 

An increasing number of restaurants are at risk of closure

With consumer spending generally squeezed, the result of all this is not good news for the sector.  Indeed, accountancy firm Moor Stephens has estimated that over 5,500 restaurant companies will go out of business in the next 3 years.

Therefore next time you visit your favourite local restaurant be prepared to see prices creeping up and some worried restaurant owners looking at a very uncertain future.

 

 

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