• Hospitality models Brexit cliff edge

An increasing number of companies are preparing for a ‘cliff edge’ Brexit, delegates at this year’s Hospace conference, held in London, were told.

The comments came as data from Eproductive and the University of Surrey reported that the number of hours worked by EU labour had increased in the two years to June 2017.

The study found that the number of hours worked by UK employees has gone down, in addition to the number of UK employees, while labour from the EU was up and the number of hours EU labour had worked was up. The sample included hotels at which two thirds of employees were from the UK, with just less than a third from the EU (but increasing) and non-EU stable at 8%

There had been a drop-off in workers from Poland, but up from Romania, Spain, Italy and Portugal, according to the report.
Professor Andrew Lockwood, University of Surrey said: “I couldn’t possibly comment on whether EU workers are more productive than UK workers. Revenue over the period went up as labour went down, which must mean that productivity has increased.”

Migration was a key topic of conversation earlier in the day, with Jeremy Robinson, partner, Watson Farley Williams, telling delegates: “Immigration is a fundamental issue to resolve. The question of bringing in visitors to the EU must also be addressed. Whilst we can’t expect anything from our government as a sector, we can keep the pressure up over aviation and migration.”

When commenting on likely wage pressure, Robinson added: “The answer is self help.”

Mark Essex, director, public policy, KPMG, added: “There aren’t many certainties around Brexit, but the cost of wages is going up. Rather than lobbying government, I would look at what I can do to mitigate what can only be upward wage pressure. Retention is important. Productivity and innovation is important.

“We have businesses who are assuming a Brexit cliff edge and actively planning for that. I think a cliff edge will be worse than people think.”

Keeping hold of existing employees was a popular theme, with John Guthrie, employment policy advisor, British Hospitality Association, adding: “Every business has to focus as never before on employee retention ahead of Brexit. There needs to be a gradual reduction in the number of EU employees that we recruit each year approaching Brexit.”

There was caution over how long the sector could rely on the bounce in visitor numbers benefitting from the fall in the value of the pound, with Martine Ainsworth, head of destination engagement, ETOA, telling the audience: “The exchange rate is playing in our favour but they don’t last forever, we will just recalibrate.”

She added: “The trouble is that Britain has never ranked as the most welcoming destination.  I’ve started to hear stories about Germans, for example, starting to feel more wary about visiting the UK. Smart businesses will start looking at reputation and look to markets such as the Nordics which aren’t as affected by Brexit.”

There was still some hope that Brexit might not come to pass, with Robinson saying: “Last year it was unthinkable that Brexit would not happen, But the fact that it is being discussed shows that we should never take our eye of the emerging political position. Time is running too short to change before Brexit, but it may change afterwards, which may colour how far we change UK law.

“There needs to be a sustained national debate about what sort of a society we want to be and how many regulations we want.” Robinson conceded that he did not believe that the appetite amongst the public for Brexit had changed.

Essex, who also thought it likely that Brexit would not be derailed, added: “The political and society effect of discovering so many people who were dissatisfied could have a greater change to the UK than Brexit. I think it will be seen as fundamentally changing, not just for the UK but for the EU, which is now unshackled.”

HA Perspective [by Katherine Doggrell]: And so, the fundamental issue of the hospitality sector remains – the UK does not produce people who want to work in it and, it needs to identify somewhere in the globe from which to conjure people to replace workers from the EU, preferably with a more parlous currency than the pound.

The mood at Hospace was not overly chipper, although there was a distinct feeling that even if Philip Hammond won’t, companies were preparing for the worse. A couple of observers from the side of proceedings confirmed that they were also briefing clients on the possibility of a Jeremy Corbyn-led Labour government. With the Conservative Party currently up to its knees in inappropriate touching, the Labour Party smells blood and the potential to enter Number 10.

Should that happen, the Brexit position was unlikely to change, given Corbyn’s lack of enthusiasm for the EU. The advice given to this correspondent was to find a yacht and pick the Mediterranean port of my fancy to spend the next five years. As March 2019 looms, an increasing number of hospitality companies feel that they too are watching the action from the sidelines.

For owners, this is now the time for operators to use their heft to prove that they can deliver not only guests, but also staff. Even the smallest hotel can offer access to a global training programme.

Additional comment [by Andrew Sangster]: The Times Politics podcast spent a few weeks where the Brexit word was banned. Whenever a contributor mentioned the “B” word, the host would sound a horn to signify the error. I empathised with the approach.

So it is with some trepidation that we once again start discussing Brexit. But there is no avoiding it, particularly, as looks likely, the date for the UK leaving is going to be legislated by the UK Parliament.

Students of game theory will be unsurprised by a failure of the two sides – the EU27 and the UK – to reach a deal. For the EU27 the optimum negotiating position is to look like you want a deal but do everything to frustrate it. While no deal will damage the EU27 – far more than many seem to have appreciated – the risk of an overly generous deal with the UK is far more dangerous from the outlook of the EU as an institution (although not for the citizens or businesses of the EU27).

It is interesting that while the UK’s Brexiteers are, rightly, criticised for their rose-coloured outlook, too few people in the EU27 seem to be realising the damage that will be done to their own economies with a no deal Brexit. In fact, many are still under the illusion that their economies will benefit from, for example, relocating bankers and other businesses fleeing the UK.

This is not to suggest that the UK will not be the worst off, it will be, but there will be net pain for the EU27 too. Losing tariff free access to the second biggest EU economy is going to hurt.

It looks unlikely we are going to avoid the worst pain: the sadomasochists seem to be in the ascendant. Is it perhaps time to stop pressurising our politicians to deliver transition deals and start telling them to invest in the arrangements for an abrupt exit? For example, more customs and immigration staff need to be hired now so that they are trained and ready to go by March 2019.

Better to make the best of the no deal than plan for the increasingly unlikely best outcome for businesses and consumers of a negotiated exit.

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