Brexit: Travel, hospitality and services companies rethink their operational strategies has been saved
Brexit: Travel, hospitality and services companies rethink their operational strategies
With the EU-UK Trade and Co-operation Agreement signed, the way the British have holidayed, worked and lived in the EU for decades has changed. While the agreement removes a significant degree of uncertainty about the future of the relationship between the UK and the EU, the deal does not replace the mechanisms in place under the EU Single Market and Customs Union. Any agreement as opposed to a no-deal is good news to the UK’s new relationship with the EU from an economic perspective, allowing for a more stable start. However, the rate of change and disruption in the market as a result of COVID-19 and Brexit will require companies to rethink how they operate and plan for the future.
Expected impact of Brexit
The results of Deloitte’s C-suite survey in January 2021, from businesses in consumer centric industries such as travel, hospitality and services, highlight that 26% of business leaders consider Brexit a high risk to business growth in the short term and 42% see it as a risk in the medium term, while 42% did not consider it a high risk.
Business revenues and profits as well as the ability to spend and invest will be impacted as a direct consequence of Brexit. Over the next three years, business leaders expect a decrease in hiring and capital expenditure and an increase in cost reduction programmes. A third (31%) expect their revenues to decrease and 42% expect a decline in profit, though nearly half expect Brexit to have little or no effect on the bottom line.
Implications to the travel, hospitality and services sectors
The travel, hospitality and services sectors may need to navigate a few hurdles caused by Brexit in the short term, for instance cost of hiring, placements and skills shortages caused by a reduction in the pool of EU labour. While more than half (53%) reported that hiring will not be impacted by Brexit, 26% expect it to have a negative effect over the next three years.
Going forward workers arriving from the EU countries will be subject to a points-based immigration system and will need to prove their eligibility to apply for work. Businesses that rely on EU nationals that will not qualify for the new work visa requirements are likely to face shortages of skilled staff in the short term. Additionally, multinational businesses, including entertainment businesses, tour operators, cruise lines, shipping and aviation companies often have a highly mobile international workforce and rely on the efficient deployment of individuals around the world, including in the EU. While Brexit adds some administrative burden on employers, it also opens opportunities to train domestic workers and source workers from other parts of the world. Our data indicate that 16% of respondents expect hiring to increase in the next three years.
Similarly, visa restrictions may impact the entertainment industry, resulting in UK artists facing added complexity and costs, to travel to and perform in Europe. UK artists and their teams, including the crew and merchandise sellers, etc., will now need to apply for visas, obtain a sponsorship certificate and provide additional documentation such as merchandise tax applications and licences. Entertainment businesses and artists will now need to reconsider their operational costs and contracts to protect their tour-based revenues.
For the cross-border services sector, Brexit has introduced some complexities around business related travel and working in the EU. The professional services sector is likely to face barriers where the service requires professional qualifications, including audit and legal services, consultancy, etc. Such businesses will need to check if their service is subject to national restrictions in specific member states and to ensure all obligations are met. For travel management companies, the restrictions on freedom of movement will require updating business travel policies and effective monitoring to ensure that clients and travellers understand the scope of the agreement to prevent increased legal risk. Additionally, individual business travellers face tighter custom controls and requirement of visas and work permits, insurance, etc. While Brexit related intricacies increase the value travel management firms offer their clients, it will be resource heavy as there will be a need to have in-depth country level understanding of rules and regulations.
When it comes to data protection regulation, the EU General Data Protection Regulation (GDPR), has been retained in UK law and applies alongside the Data Protection Act of 2018. While the key principles, rights and obligations remain the same, there are some implications for the rules on transfers of personal data for which the UK is awaiting adequacy decisions from the European Commission. While a draft decision was published recently which recommended that the UK receive an adequacy decision, it is not clear if the adequacy decision will replicate the existing agreement. In case the UK is not granted full data adequacy, businesses will need to examine their data protection measures and contracts and implement suitable legal safeguards. Businesses in travel and transportation, professional business services, betting and gaming, entertainment and hospitality sectors which rely heavily on the flow of information may face significant changes.
Businesses are prioritising survival and cashflow management, however the short-term challenges the sectors face risk having a lasting impact on businesses. Though some businesses may see positive impact of Brexit too, for instance domestic producers of goods and services previously sourced from the EU. The impact of Brexit on some sectors may be masked by the pandemic and will only become clearer as the pandemic recedes. From reassessing contracts and service plans, to reviewing their recruitment, retention and training strategies, businesses will need to rethink how they operate and take advantage of potential opportunities.
To learn more about the immediate impacts of Brexit, implications and practical actions for business, visit Deloitte Brexit Deal Insights webpage. For survey details, visit Deloitte Target sustainable growth in Consumer Businesses Insights