We don’t yet know the long-term impacts of the COVID pandemic on the global restaurant landscape. And, in the UK, the bruised and battered industry is being hit by a second, potentially much bigger wave: Brexit.
We checked in with our London-based Managing Director Philipp Laqué for an update on the current state of the industry and what the future might hold.
Q: Philipp, the UK has been hit particularly hard in recent months, with a second round of forced closures and continued loss of revenue. In fact, the UKHospitality and CGA Quarterly Tracker reported that sales in October-December were down £18.7bn or 57% compared to the last quarter of 2019. Do you see any light at the end of the tunnel?
A: Yes and no. We’re all hopeful that the vaccine will allow regulations to loosen, and Brits can go back to visiting, shopping, eating and working away from home.
However, here in the UK, we should anticipate a new issue the industry will need to manage post-COVID-19: a potential labor shortage due to new Brexit regulations. The Economic Statistics Centre of Excellence reported in late January that 1.3m foreign-born workers have left the UK during the pandemic, of which 700,000 were in London. Among the sectors hit the hardest were accommodations and food service.
As the country gradually gets back up and running, operators might not realize they are lacking staff. But the operators able to reopen and that recover to past volumes may feel the sting of a labor pool that has shrunk by nearly a million people. We may find the industry will need to offer higher wages or recruit in different ways.
Q: What other impacts do you foresee coming from Brexit?
A: Historically, London has been a thriving, multicultural city, with people coming together from all over the world. Secondly, London is a financial hub, drawing high-income workers from around the world, who have money to spend and invest. These two factors saw London as the birthplace of new ideas and innovations of all types, including creative restaurant concepts.
Brexit makes it more difficult for EU citizens to obtain a visa for entry. Combined with the exodus described earlier, the city risks losing its multicultural appeal. It also remains unclear whether London will retain its position as a financial hub in Europe. Basically, the two things that drove innovation in the city are at risk. This loss of multiculturalism could limit innovation and lessen the city’s overall appeal — for tourists, and for businesses and the people they employ.
We still can’t assess the long-term effects on the overall economy. We may have trouble beyond labor, too. Supply chain disruptions, trade disputes and loss of production are just some of the examples.
Q: Clearly, there remain many unknowns in the short term, not all related to the pandemic. What are your thoughts about any long-term impacts of COVID-19 on the UK?
A: I think people will continue to want to work from home. As reported recently by The Atlantic, there’s no going back to how we all worked pre-COVID-19; we’ll see a permanent transition from “spatial proximity” (work where you live) to “cloud-based connectivity” (work anywhere). Now that location isn’t an issue, people are also moving out of cities to get more space for less money.
If this does indeed play out long term — and we should plan for it now — restaurants will experience a geographic shift in demand. Once-booming locations in city centers may falter or close if people don’t travel to the city to work each day. On the other hand, neighborhood pubs usually open during the post-work hours may find they have a flush lunch crowd due to their patrons staying in the neighborhood.
Q: What can restaurant brands do to survive and thrive during these difficult times?
A: Versatility is the foremost tool restaurants can employ right now, and it should be exacted across all aspects of the business.
We’ve already seen a big shift in how customers get their food — as it relates to delivery, takeout, and limited dining in. It began out of necessity, but as we continue to adapt and respond, operators may see a permanent shift to dining at home.
Locations will have to be closely analyzed, too. If businesses don’t return to Central London, for instance, and workers remain in their homes, often outside the central business districts, how does that impact overall traffic? Some brands are heavily concentrated in these formerly high-traffic areas. Do they close? Focus more heavily on neighborhood locations? Do they move operations out of the city? Shift business models entirely?
Then there’s the clientele. Now that people are working from home, does the local pub offer lunch, as noted above? What does the coffee or breakfast concept do to survive? Every aspect of the business needs to be looked at from a number of different ways.
Q: The ongoing pandemic keeps asking so much of the restaurant industry. Are any opportunities arising from it?
A: Most certainly, it’s not all gloom and doom. There is a real opportunity for growth. We see this time as a reset for restaurants and consumers. Restaurants need to change, and consumers are willing to experiment alongside brands, which brings us full circle to that point of versatility. Whether it’s an established brand rethinking business concepts to meet the new behavior of their longtime clientele, or new concepts arising to meet changing demands (we think health-based concepts will fare particularly well), the future is ripe for new approaches and success.