One year after 2016 Brexit referendum, British foodservice industry shows early signs of slowing down

Full-service restaurants register largest dip in visit growth from 3% down to 2%, dinner visits slip 3%

London, June 21st 2017 – According to new research from global information company The NPD Group, the British Out of Home (OOH) foodservice market has slowed since the June 2016 Brexit referendum result. While visits after the referendum (10-month period July 2016 to April 2017) were still 0.7% over the equivalent period a year earlier, this is slower than the 1.5% visit growth seen in the period before the referendum (six months Jan to June 2016 compared to same period the year before).

Visit growth to quick-service restaurants (QSR) has slipped marginally. QSR was registering pre-referendum visit growth of 2.2% but this has now fallen to 1.9%. Full-service restaurants – the most expensive foodservice channel – have seen the most noticeable slowdown from 3% down to 2%.

Cyril Lavenant, Foodservice Director UK at the NPD Group, said: “The British foodservice market has slowed since the Brexit referendum one year ago and the industry remains smaller than it was in 2009. However, the main message is that there is still growth and the industry is currently showing resilience. This is because operators have spent the past 10 years since the last downturn creating a lively and appealing foodservice environment that encourages consumers to keep eating out.

“However, there are big challenges ahead. The weakness of sterling means foodservice operators will have to replace global sourcing with local sourcing while ensuring they still get the quality they need. Inflation will prompt consumers to make savings and so we expect it to dampen demand for eating out. Tighter immigration rules will make it harder for operators to hire staff. This is a huge issue in an industry where around 20% of employees are not from the UK. Even if a work-visa system operates when the UK leaves the EU, hiring EU staff would still be more difficult because it will absorb time and create costs. Any sustained staff shortage would damage Britain’s foodservice sector.”

Dinner – and the kids – lose out post referendum

Consumers have started to drop the more expensive dinner occasion, which is down nearly 3% in visit terms, although breakfast and lunch appear to be taking up the slack with faster growth since the referendum than before. Children are another casualty of the post Brexit eating-out market. There has been a drop of over 2% in visits by adults accompanied by children of 17 years of age or less.

But contrary to the trend seen in the recession that began end of 2007, visits not involving a deal or promotion are still growing faster than promoted visits. This is a clear indication consumers feel they are getting good value for money from British foodservice operators. However, the perception of value might change if operators introduce large price increases to cope with strong inflation. Operators will have to maintain a very appealing experience combining great service, as well as high quality of food and drinks to mitigate the negative impact of higher prices.

Consumers are not sacrificing quality

There’s no evidence that consumers are choosing lower quality food and drinks. In fact, the number of visits where a consumer chooses an outlet for its ‘quality’ has increased by 3% since the referendum.  However, inflation is definitely evident in foodservice and has pushed the average bill per visit up by slightly more than 2%.

Meanwhile, less affluent consumers are showing the most caution over spending. Visits among the C2DE demographic have dropped nearly 1% in the 10 months July 2016 to April 2017 since the Brexit referendum. Prior to the referendum, this demographic was recording growth in eating-out visits. 

Cyril Lavenant, Foodservice Director UK at the NPD Group, added: “We are only one year beyond the referendum and the full effects of Brexit on Britain’s foodservice industry have not yet appeared. But one thing is for sure – the industry will need strong growth rates if it is going to match and exceed the size it enjoyed before the 2008/2009 recession. The post-referendum slowdown will make it more difficult to get there.”

NPD GROUP FREE SEMINAR: How to Survive Disruption

Exiting the EU: as Britain begins formal Brexit negotiations, what impact is political and social change going to have on the British foodservice industry? Join the NPD Group’s ‘How to Survive Disruption’ Insights Seminar to discover the critical factors needed for foodservice operators and manufacturers to thrive and implement a successful growth strategy. The free ‘How to Survive Disruption’ Insights Seminar will be held at 3PM on July 11th 2017. Please contact Cyril Lavenant at The NPD Group: Cyril.lavenant@npd.com

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