The Brexit forecast for the hotel industry is economic sunshine and showers

The Brexit forecast for the hotel industry is economic sunshine and showers, an expert has warned.

Graham Randall, partner and hotel and leisure specialist at leading restructuring and insolvency practice Quantuma, sees challenges and opportunities.

He cautioned: “The economic uncertainty following last week’s EU referendum vote could highlight underlying problems in some businesses.

“We will soon find out how accurate the ‘Leave’ campaign’s claims are that there will be minimal disruption to the economy but with the current uncertainty existing there is the potential for the UK to slip into recession.

“The effect of the Brexit decision and its likely impact on the hotel and leisure sector should not be underestimated. Businesses already facing tough times could experience increased cashflow problems and restricted credit lines which could threaten their survival.

“On the other hand there are viable businesses out there that are under-capitalised or poorly managed and these may represent real opportunities for growth by acquisition or merger.”

Mr Randall noted that hotel and leisure had the highest proportion of jobs of any sector paying the minimum wage.

He went on: “Businesses with already low operating margins are typically spending between 25 and 40 per cent on wages. The recent introduction of the Living Wage is forcing employers to look even more closely at reducing or cutting out bonuses and other benefits or considering redundancies whilst retaining staff morale and high levels of customer service.

“Many employ a proportion of continental European staff so changes that need to be made to employment contracts reflecting the laws in other jurisdictions would have to be carefully considered.

“There is already a shortage of personnel in certain positions and continuing to entice skilled and experienced staff from the EU is likely to prove more difficult with additional work permits making the recruitment process costlier and onerous. In addition supplier contracts may need renegotiating.

“On the positive side a fall in the value of the pound will see some people opting to stay in the UK rather than seeking low cost package holidays abroad, providing a boost to the domestic market.”

He added: “An uncertain business environment will result in weaker domestic demand though the long-term impact may be more positive for the industry due to increased affordability of the UK and London as a destination. However, given the potential impact of lower investment, business travel decisions could be affected.”