Foodservice Footprint FPT2014062 Brexit not an issue, but NLW causing “distress” Foodservice News and Information Out of Home sector news  NLW news-email National Living Wage Julie Palmer Epos Begbies Traynor

Brexit not an issue, but NLW causing “distress”

The National Living Wage has pushed the number of businesses in “financial distress” up by 23%, according to research by Begbies Traynor.

As of October 1st, there were 97,342 firms struggling, up from 78,917 six months ago. Almost a third (33,835) were retailers, but significant numbers of bars and restaurants (10,809), food and drink retailers (7,803) and hotels (3,347) have also experienced a “drastic spike” in corporate distress.

The foodservice and hospitality sectors were always expected to be amongst the hardest hit by the higher NLW. Julie Palmer, a partner at the insolvency company, said many businesses could take more drastic measures to manage their growing cost base.

“For growing numbers of low wage employers in these sectors, the future looks decidedly uncertain,” she explained. “Following recent reports that Brexit has so far had a minimal impact on the UK economy, our data clearly indicates a strong link between rising levels of business distress and the implementation of the National Living Wage six months ago.”

In a poll published by Epos Now this week, 77% of small businesses in the retail and hospitality sectors said the EU referendum result has had little impact on them so far. Despite the fact that an estimated 442,000 EU migrants work in Britain’s restaurants and hotels, only 8% said that “access to workers from abroad” was their biggest business concern.

Their mood appears to be in stark contrast to those in food manufacturing. Some 30% of SMEs surveyed by the Food and Drink Federation said they were “much less confident” about the UK business environment since the Brexit vote.

Food manufacturers see exchange rate volatility as the major risk to their business in the coming 12 months, followed by increased costs, access to labour and access to skills. More than four in five (71%) of the firms with EU employees said staff have expressed concerns following the referendum, according to the FDF’s new research.

The pound has taken a beating in recent days as fears of a possible “hard Brexit” increased following the Conservative Party conference.

See August’s Footprint magazine for a special supplement on Brexit.