There’s no doubt that the U.K. vote to leave the E.U. heralds much uncertainty for the leisure and hospitality sector. Representing 10% of GDP, this sector employs 4.49 million people, 15% of whom are migrants from the E.U. Unless steps are taken to ensure that the U.K. retains the ability to employ foreign staff and remains friendly to investors, the leisure sector faces a difficult future post-Brexit.
As part of a series of updates on the effects of Brexit on various U.K. industries, Willis Towers Watson recently released its insights on the hospitality and leisure sector.
In the medium-term, consumer confidence is likely to be damaged by rising inflation affecting disposable income available to spend on consumer travel, eating out and other leisure activities.
Several other key factors could impact the U.K. leisure and hospitality sector
In the short-term there may be a reduction in capital investment in the hospitality and leisure industry, with investors anxious about investing large sums in an uncertain market. On the other hand, a weaker sterling will make investing in real estate projects such as hotel developments relatively cheap for overseas investors.
Corporate and business travel has already been negatively impacted mainly due to the uncertainty around Brexit policies. This has lead companies to deliver cautious and tighter travel policies with a few indicating that legislation will impact future buying decisions in the corporate travel sector.
Free movement of people
The industry relies heavily on E.U. labor and may find it hard to find replacements if the U.K. Government places restrictions on E.U. citizens working in the U.K. An earlier Wire post examined the potential impact of such restrictions in the U.K. food and drink industry.
Return of the “staycation”
The U.K.’s decision to leave the European Union could have a very similar impact on the tourism industry to that of the 2008 financial crisis, with more people opting for a staycation instead of travel abroad.
It’s equally important to consider future business drivers and opportunities
Weak pound is expected to drive U.K. Tourism in 2017.
Overseas visitors are expected to spend £24.1bn in 2017, up 8% on 2016, according to VisitBritain, the government-backed national tourism agency. Just over 38.1 million tourists are expected to enter the U.K., up 4%. Generally, the longer the weak pound remains then the better it is for many businesses in the sector.
Negotiations with the E.U. around migration controls will be crucial to the leisure and hospitality industry as a whole.
The Confederation of British Industry (CBI) cited the leisure and hospitality industry as an industry particularly reliant on foreign labor to keep their businesses going. It called for ‘urgent guarantees that E.U. workers in the U.K. can stay in the country’ and argued that access to workers abroad had been ‘part of the solution’ to support economic growth.
The possibility of a ‘hard Brexit’ has increased fears within the sector regarding the sector’s workforce.
Reacting to Theresa May’s announcement that free movement of labor will definitely be restricted as the U.K. government pursues a ‘hard’ Brexit, Ufi Ibrahim, Chief Executive of the British Hospitality Association (BHA), called for a ten-year timescale to be adopted in order to make it easier for companies to adapt.
Read the complete update on the UK Leisure Industry Post-Brexit
This post was co-written by Kay McMenamin. Kay heads up the London-based Leisure & Hospitality Practice team and has been with Willis Towers Watson for 5 years.