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How a Brexit could affect the hospitality industry

By Matthew Pryke , 21-Mar-2016

How a Brexit could affect the hospitality industry

Matthew Pryke, a partner at Hamlins law firm, outlines some of the areas where hospitality could be affected should Britain leave the EU. 

The hospitality and leisure industry awaits the decision on 23 June this year with anticipation as to whether the UK will be leaving the EU. The impact a Brexit would have on UK businesses in the sector is not to be underestimated, and businesses would do well to bear in mind what a vote to leave would entail.  

Employment

The vast majority of businesses in the UK currently have many continental European staff on their pay role, and would have to consider changes that would need to be made to the terms in their employees’ contracts to reflect the changes in law in different jurisdictions. As demonstrated by Switzerland, if the UK left the EU it could still operate under the European Economic Area by forging a new trade relationship with the EU – this would effectively mean the UK would operate under the umbrella of EU employment law.

With regards to those from overseas working in the UK hospitality sector, a Brexit would certainly have a negative impact. Luring in skilled personnel from the EU would be considerably more difficult. Additional work permits would need to be acquired, making the whole process more complicated, costly and time-consuming. This would only have the effect of incentivising workers to opt for EU member states which boast strong economies. A current shortage of skilled personnel existing in certain positions, such as chefs in restaurants, will no doubt be made worse by and exit vote.

Supplier contracts

In addition, commercial contracts (e.g. with suppliers) would also need reviewing if the UK leaves. Clauses relating to restriction-free trade across a single market needing to be amended, since the UK would be operating under different principles of EU contract law – these may however prove difficult to negotiate.

UK businesses should seek the cost-control and certainty provided by English courts, bearing in mind that a businesses and supplier can decide amongst themselves which jurisdiction to apply contract. Furthermore, the UK would have to have in a place a different trading agreement with each country it imports / exports goods from, whilst seeking to avoid excess tariffs or restrictions.

Preparing for a Brexit 

Hospitality businesses would be well-advised to monitor the situation and planning the measures can put in place to prepare themselves for a Brexit. The ongoing uncertainty as to whether the UK will go, combined with the reality of lengthy negotiations to follow, could affect consumer confidence which is not desirable. Adding to this the predicted economic outlook following a Brexit, and one could understand why hospitality businesses would not favour a vote to leave.

Staycation boom

It would not be all doom and gloom for UK businesses however. For the less wealthy UK population who rely on low-cost package holidays to Europe, a predicted 20 per cent drop in the pound could deter many from taking holidays abroad. This could result in many opting for a domestic holiday instead, putting money straight back into the UK economy rather than spending abroad.

There will likely be mixed feelings about a Brexit within the hospitality sector, though the arguments to stay seem to be overwhelming; businesses could save time and money by not having to concern themselves with details such as amending contracts and so on, as well as continuing to benefit from skilled overseas workers that are filling the gaps in roles that could otherwise be left vacant.

Even if the UK did leave the EU, there would be a layover period that would allow businesses to familiarise themselves with required changes – there would be no expectations of making changes overnight, but rather time would be granted to enable companies to decide what is in their best interest.