Member Article

How will Brexit impact the travel industry?

Brexit currently, appears to be in somewhat of a muddle. Right now it’s not 100% clear if Brexit will actually happen. Let’s assume however, that it does – what consequences will it have in regards to the UK Travel industry?

There is currently a strong relationship between the UK and the rest of the EU in terms of tourism. The EU is the most popular holiday destination for UK travellers, whilst the EU provides the main source of overseas visitors to the UK.

In 2014, 76% of all UK holidays abroad were in EU countries, and 63% of all visitors to the UK were from EU countries. In 2014, there were 10.8 million UK ‘visits’ to Spain, 6 million to France and 2.1 million to Italy. In specific relation to maritime transport, EU countries contribute over 85% of the total passenger traffic to the UK.

These statistics from an ABTA publicationillustrate how popular EU destinations are for British holiday makers. In addition to this, around half of UK exports are currently destined for EU countries and over half of UK imports come from the EU. The logistical costs of a UK exit from the EU will have far reaching implications to both EU and British businesses.

A Weakened UK Currency The uncertainty surrounding the impact of Brexit on the UK, has led to a weakened pound. This could negatively impact UK companies operating in the EU. Operators will have to pay more to employ people in Europe and to cover general operating costs. EasyJet for example, reported that the drop in value of the pound, had cost them £40 million in the first month after the Brexit vote. UK residents travelling to the EU could find that the costs associated are greatly increased if the sterling loses further value. If the pound is weakened relative to the Euro, everything from hotels to souvenirs will cost more if you’re a Brit abroad.

EU Legislation & The UK Traveller Thanks to the EU, UK travellers currently enjoy the benefits of different legislations that could be disavowed when the UK exits. Freedom of movement in the EU It seems unlikely that UK citizens will require visas to travel to the EU after an EU exit. Although we can expect longer queues and perhaps more stringent checks in the non-EU citizens queue at passport control.

Restrictions on Air Service Agreements Upon a UK exit, new air service agreements will have to be established, possibly leading to more expensive airfares. It’s difficult to say, or estimate how much airfares could increase by.

Lower Compensation for Delayed Flights Under current EU Regulation 261/2004, passengers are entitled up to £460 in compensation when their flight lands more than three hours late. However, aviation minister John Hayes has refused to confirm if the legislation will remain in place after the UK exits the EU. In addition, mobile phone roaming fees are currently capped by the EU, again, new legislation would have to be established to cap these fees post-Brexit. European Health Insurance Card

The European Health Insurance Card currently ensures that British holidaymakers and expats who have moved to live in Europe, are able to receive healthcare. It is not clear if this card will remain after Brexit, meaning that travel insurance costs will rise and expats will have to pay for healthcare – or travel back to the UK for treatment.

The Package Travel directive within the EU, offers protection in cases of insolvency or any failure to perform contracted services. This should actually remain in place as it has become implemented within the laws of the UK.

Travel Industry Work Force A reduction in the ability to employ immigrants and foreign nationals, could negatively impact UK travel and hospitality businesses. In addition, the ability of UK residents to work in the EU is also likely to become more difficult. This could result in higher expenses in terms of wages for the British hospitality industry, and British travellers may find it more difficult to travel around Europe if they hope to fund their travel expenses with temporary jobs in different EU countries.

UK Citizens with EU Properties 1.3 million UK nationals have homes in the EU. In 2014 there were over 8 million visits made by UK residents, visiting family and friends in their EU properties. Brexit could have potentially negative consequences for the travel sector, most likely leading to higher fares for flights from the UK. Brexit could also lead to the end for Brits regarding the European Health Insurance Card, as well as shared tax laws that currently benefit many British home owners living in the EU. This could negatively impact the number of British people buying properties in the EU, which in turn will impact the amount of people visiting family in the EU.

Staycations The sharp rise in the cost of holidays abroad could lead to an equally sharp rise in the number of Brits choosing to holiday within the UK. In addition, overseas tourists may be lured to the UK by the more favourable exchange rates; providing a much needed boost to the UK economy. In the first quarter of 2016, there was a 10% rise in people holidaying in England compared to same period during 2015.

Unfortunately, the rise in staycations is also likely to be due to the safety concerns of families regarding popular destinations such as France, Turkey and Egypt and European travel operators such as Lowcostholidays going into administration. In the summer of 2016, the Mediterranean was the most popular destination with British tourists, with Portugal and Spain experiencing a 23% and 22% increase in bookings respectively.

The rise in staycations is very good news for companies such as Darwin Escapes, who have recently invested in a number of developments in UK tourist hotspots, such as Cornwall and the Lake District. This type of investment, in addition to a less favourable currency exchange rate, may result in even more travellers choosing to holiday at home in 2017.

In conclusion, Brexit is predicted to have a mixed effect on the UK travel industry. With costs of foreign holidays increasing, EU and foreign travel operators will almost definitely experience a negative impact, unless the pound can recover in relation to the Euro. With the number of staycations likely to increase however, travel companies who operate inside the UK, are likely to experience positive growth.

This was posted in Bdaily's Members' News section by Simon Evans .