Brexit anxiety hitting confidence of pub, bar and restaurant bosses

Pessimism about prospects for the eating and drinking out market has increased in last quarter, new poll from CGA and Fourth shows.
Download Business Confidence Survey Results – Q3 2018

Pessimism about prospects for the eating and drinking out market has increased in last quarter, new poll from CGA and Fourth shows

Concerns over the impact of Brexit is driving a fall in confidence among the leaders of Britain’s eating and drinking-out sector, with a majority backing a ‘soft Brexit’ outcome, while more than two-thirds support a second referendum, the new edition of the CGA Fourth Business Confidence Survey reveals.

Just over a third (36%) of the bosses of pub, bar and restaurant groups are optimistic about prospects for the market over the next 12 months – a drop of 11 percentage points since the last poll of leaders in May.

While two-thirds (67%) remain upbeat about their own businesses’ performance – that has dropped from 75% over the last quarter. In all, 71% said that the decision to leave the EU had already had a negative effect on business.

The exclusive survey of corporate leaders and entrepreneurs across out-of-home food and drink market was conducted in August 2018 by business insight consultancy CGA in partnership with leading hospitality software partner Fourth.

It shows that a ‘soft Brexit’ is the favoured option for 62% of bosses. No other outcome, whether ‘no deal’, ‘Chequers’ or ‘hard Brexit”, gains over 10% support. In addition, 69% said they believed there should be a second referendum.

Among the nearly three-quarters of leaders that said the Brexit vote has already had a negative effect – most cited an increase in the cost of ingredients and the decreased availability of staff. Nine in ten (92%) say the reduced access to kitchen staff has had or will have, an impact on their business. “The restricted availability of staff is immediate and critical,” said one respondent to the survey. Leaders indicate that challenges are particularly acute in London, where businesses are most heavily dependent on EU nationals for staffing.

Leaders identify Brexit-related damage to consumer confidence too, with half (48%) forecasting people’s frequency of eating and drinking out will decrease over the next six months, and only one in ten (9%) expecting it to increase. “Brexit uncertainty is massively damaging corporate spend and household confidence,” commented one respondent.

The survey from CGA and Fourth also reveals some of the steps operators have taken to prepare for Brexit. Three quarters (73%) have anticipated its impacts by investing in staff training and retention, while a quarter (27%) have invested in local food and drink suppliers. But nearly a third of leaders (31%) still consider their business to be under-prepared for Brexit, or not prepared at all.

Amid the challenges, the research reveals some grounds for cautious optimism in the sector. More than a quarter of leaders (29%) say their business’ performance had been ahead of expectations, thanks in part to the twin boosts to pubs and bars of the hot weather and the football World Cup. Some bosses also see possible long-term benefits of Brexit, especially if it cuts red tape and reduces non-EU tariffs.

Phil Tate, CEO of CGA, said: “Our Business Leaders’ Survey is the clearest indicator yet of the dramatic impact of Brexit on the hospitality sector. It reveals the huge disruption that the EU Referendum has already caused to the costs and confidence of businesses, and the further impacts it is likely to have on staff recruitment and retention, especially in London. Our research suggests that the large majority of operators are now pinning their hopes on a ‘soft’ Brexit, or even a second Referendum. But while many businesses are moving to mitigate the effects of Britain’s departure from the EU, some are, by their own admission, still not ready for it.”

Tate added: “Restaurant, pub and bar operators that are sharply focused on meeting consumers’ needs, offer good value for money and are well differentiated from the competition still have plenty of headroom to grow. But the Business Confidence Survey confirms that Brexit is going to bring enormous challenges for the sector into 2019 and beyond.”

Ben Hood, CEO of Fourth, said: “It is clear to see that sustained Brexit uncertainty has impacted confidence among industry leaders. With rising costs – including those associated with employment – a shrinking talent pool and the sector’s heavy reliance on EU workers, the government needs to navigate the complex process of leaving the EU with an approach that supports hospitality employers.”

“Beyond the negotiations, and despite the uncertainty, what we see is an industry rolling up its sleeves to negotiate the challenges ahead: it is clear that employers are stepping up their investment in technology that supports upweighted training and development as well as employee culture and engagement,” Hood added. “These are the things that matter when it comes to attracting and retaining the best talent, and ultimately, as we know, are critical in delivering the right guest experience.”

The CGA Fourth Business Confidence Survey is produced in partnership with Fourth and is based on responses from more than 130 leading figures from the industry, working at CEO, MD, chairman, board and senior management levels.

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