Brexit – the effects on the economy and UK businesses
Thousands of UK businesses seem to be struggling, to the point where there are quite a few of them likely to be going out of business. Whether large or small, it is increasingly becoming difficult for businesses to turn a profit and this is wide reaching as it affects various sectors such as retail, hospitality, tourism, real-estate, manufacturing and so many others.
A lot of the issues these businesses face are a result of ‘Brexit’ which has brought on economic uncertainty, slow growth and instability of the UK currency and capital markets. Following on from this, we see an increase in competition, increases in business rates, scaling back on expansion plans and in some extreme cases, the closing down of loss-making outlets.
An example of this would be the recent case of celebrity chef Jamie Oliver who has had to close two of his flagship restaurants – Barbecoa located in Piccadilly and next to St. Pauls. Although both restaurants went into administration, Mr. Oliver was fortunate enough to buy back one of them almost immediately. It was only recently that ‘The Jamie Oliver’s Restaurant Group’ had to close 12 out of its 37 Jamie's Italian restaurants.
If we consider the increasing pressures on household spending in comparison to the minimal income growth, it gives us an insight into some of the changes that have been seen in consumer buying trends. Specifically, the Restaurant business has experienced a huge decline in fortunes and those in the business have attributed this to the high rate of cancellations of restaurant table bookings.
Restaurants are recording a loss from no-shows that are now running into the thousands in just one weekend and they have attributed this to online booking apps that allow consumers to book several tables, in some cases for groups up to 20, and not show up at all. Restaurateurs are now pushing back on this fad by naming and shaming “no show” guests, requiring deposits and even selling tickets for tables.
However, it is not all gloom and doom as there now seems to be a growing interest in the UK from across the world and a rush to take advantage of the after effect of the UK’s decision to leave the European Union. Several reports have shown that these foreign investors are taking advantage of the current exchange rate of the sterling against the US Dollar and the Euro, as it provides them with more purchasing power. They are actively seeking and finding opportunities to increase their investments in the UK.
Although the construction sector has seen a decline due to scepticism or even a lack of confidence in the UK’s economy, those within real estate and property management have seen an increased amount of activity in the purchasing of existing commercial property such as Pubs, Restaurants and even Hotels. These investors have either chosen to keep these properties as they originally were or re-purposed them for mixed-use or conversion to residential apartments.
According to experts, there is no reason why the UK would not continue to be an attractive investment proposition for investors, irrespective of our membership of the EU. The advice to UK businesses is that in this climate, the key to success will be to keep their organisation’s debts low or avoid debt completely if possible, work on maintaining a strong brand and have the best people working for your organisation.