A decision will be made by the British electorate on 23 June 2016 as to whether the UK should leave the EU. There are a number of factors businesses in the hospitality and leisure industry will need to be aware of ahead of the vote and to prepare for the UK to potentially leave the EU.
The travel industry – which of course has a direct influence on the number of overseas visitors coming over to the UK and therefore on the hospitality industry – will have a lot to think about if the UK exits. Airlines will likely have to negotiate new air service agreements, running the risk of reducing competition and fares rising. British travel companies have been benefiting from a single EU aviation market, which has driven down the costs of flights to the continent, however this freedom could likely be stifled.
Furthermore, investment banks have warned a Brexit could potentially see the pound drop by 20%, which could affect the less wealthy population who relies on good-deal package holidays to travel to Europe. Businesses in the hospitality and leisure industry could perhaps take advantage of this by levying the idea that the British population choose a domestic holiday, which would help business and inject cash into UK hotels, spas, restaurants, railways, tourist attractions and so on.
In addition, if predictions are accurate that the sterling could dip as low as $1.15 against the dollar and €1.05 against the Euro, the UK travel, leisure and hospitality industries could benefit a good deal from foreigners choosing the UK as their first choice holiday destination.
However, the ongoing uncertainty of a Brexit, along with the reality of lengthy negotiations to follow could negatively affect consumer confidence. This, combined with the general economic outlook is certainly a concern and could be damaging for hospitality businesses.
Businesses will also need to think about changing relevant terms in their commercial contracts, such as those with their suppliers, which may be difficult for the UK to negotiate. Clauses in contracts relating to restriction-free trade across a single market may need to be amended, as they will no longer be abiding by the principles of EU contract law. There will naturally be more duties on importing and exporting goods, and a new trading relationship would need to be in place with each different country the UK is selling / buying goods and services to / from, while ensuring businesses are not hit by excess tariffs and other restrictions. A business and supplier can decide between themselves which jurisdiction to apply to their contract, so UK businesses should inevitably look for the certainty and cost control provided by English Courts.
A Brexit would undoubtedly have a negative impact on the industry in terms of attracting highly skilled-personnel from the EU, as individuals will need additional work permits and will likely be dissuaded from coming to the UK, favouring countries with strong economies such as Germany. If migrants are unable to take jobs, this will exacerbate the existing staff shortages facing certain parts of the hospitality industry, for example, some restaurants have reported a lack of chefs.
In terms of contracts with existing employees from the EU, most businesses will have to think about the current terms they have in place with their workers to ensure they accurately reflect changes in law for different jurisdictions. The UK could forge a new trade relationship with the EU if we were no longer part of the union, which Norway and Switzerland have done, meaning the UK could still operate under the European Economic Area. This would tie the UK to EU employment law.
In conclusion, there will likely be mixed feelings from businesses in the hospitality and leisure industry regarding the in / out decision, however the prevalent thought will likely be a desire to ‘stay’. In any case, change will not be made overnight but rather a layover period would allow businesses to adapt to the changes and decide what is best for them. One expects the industry and its businesses will be forced to adapt and evolve, seeking new arrangements, structuring and ways of doing business to benefit in the medium to long term.
Matthew Pryke is a partner at Hamlins law firm