Calm Before The Storm? Update On Brexit Impact On UK Foodservice

Bob O’Brien, senior v.p. of global foodservice for The NPD Group, caught our attention with a recent blog post about restaurant traffic in the United Kingdom. Traffic growth continued positive in the second quarter 2016 in the U.K. (the Brexit vote was June 23), following equally strong growth in the first quarter of this year. In fact, traffic growth in the U.K. during the second quarter was among the strongest of any of the 12 developed and developing markets NPD tracks through its consumer-panel based CREST research. But with consumer confidence falling, O’Brien suspects traffic will soften in the U.K. in the second half of the year. And he continues to believe the impact of Brexit on the U.K foodservice market will be quite negative in coming years.

Seeing this, we checked in with Peter Backman, principal at Horizons Ltd., the London-based foodservice research firm. He quite frankly believes this is the calm before the storm.

“The impact at the moment is the effect on the value of pound sterling, the U.K. currency,” he wrote us. “This is driving up costs (including equipment and food) and at a time when the market is softening. With other costs also increasing, this has the makings of difficult times ahead. The market may continue to grow, but (some) operators will feel the pain.”

In early October, at a meeting of the ruling Conservative Party, Prime Minister Theresa May said that the government will invoke Article 50—the European Union agreement article that allows a member to announce its intention to withdraw from the European Union—by the end of the first quarter next year. While there is still quite a bit of uncertainty surrounding this announcement, Backman says once that announcement is in fact made, “Then all hell will break loose,” he wrote, “and it’ll be half a dozen years until we see what the new landscape looks like.”

Information on Horizons research can be found at hrzns.com. For information on NPD research, go to npd.com.