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UK’s Prime Minister Theresa May on January 19, 2017 delivering a significant speech on Brexit during the World Economic Forum in Davos, Switzerland. The Associated Press
Since the vote at the end of June last year the British government has only hinted at how it sees the country extricating itself from the European Union (EU). Prime Minister Theresa May’s speech finally gave everyone an insight into her thinking.
You see, even though the ballot paper only asked a straight yes/no question there are a number of possible permutations, neatly described by the terms “hard” and “soft” Brexit.
Although there are no agreed definitions, the latter could mean staying within, say the single market – covering the free movement of goods, people, services and capital between states – while the former would mean the cutting off formal all ties with the EU and becoming a bit like Canada is at the moment.
May’s speech pointed the UK firmly in the direction of a “hard” Brexit.
“We are leaving the European Union, but we are not leaving Europe. And that is why we seek a new and equal partnership — between an independent, self-governing, global Britain and our friends and allies in the EU,” she said.
“Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave.”
May’s desire to push for a complete break with the EU is likely to have wide-ranging ramifications for the travel and tourism industry. She has signalled that she will begin the departure by triggering Article 50 – the mechanism by which a country leaves the EU – in March, which gives the UK a two-year period to negotiate the terms of the exit.
With all that in mind, it’s worth taking a look at where different sectors currently stand.
Aviation
Through a series of liberalization measures the European Union helped to revolutionize air transport across Europe. Instead of countries having to agree bilateral deals Europe was treated as one single area.
This freedom helps explain why the likes of Ryanair and EasyJet have been able to grow into two of the world’s largest airlines.
A deal signed in 2007 also created an open skies arrangement between the U.S. and EU, something that undoubtedly helped Norwegian Air build a substantial low-cost long-haul transatlantic offering.
The main result of all this has been to drive down fares.
Given the obvious benefits the UK airline industry has seen from being part of the EU it is unsurprising that it would like as little to change as possible.
“Throughout the referendum campaign I don’t remember anyone ever criticising what Europe has achieved in aviation. No one said ‘oh gosh isn’t it terrible we’ve got lower fares or let’s go back to giving Air France more subsidies’. Aviation has actually been one of the great success stories of Europe and of course the UK was absolutely at the centre of what was achieved,” said aviation consultant Barry Humphreys.
“So it’s not really surprising for most in the UK aviation industry that the status quo would be a pretty good outcome of any negotiations – or at least as close to the status quo as can be achieved.”
If no deal can be agreed with the EU in the two-year negotiating period the UK would be forced to fall back on to rules provided by the World Trade Organization but the problem for the airline industry is that the WTO doesn’t cover it.
This all points to a special deal being done and Humphreys says high level talks have taken place between the industry and government.
Outside of the EU it is fairly easy to imagine UK airlines being allowed to fly from the UK to other European countries but what about UK airlines flying between say Spain and Germany, something that EasyJet does now. The Luton-based company has already said it plans to establish a business somewhere within the EU in order to circumvent these rules.
And then there is a question of ownership. The rules of the internal market apply as long as they are majority owned by member states or nationals.
The UK no longer being part of the EU would likely cause shareholder upheaval at EasyJet, Ryanair and International Airlines Group, which owns Iberia and British Airways.
Lastly, there are the pan-European agencies that national governments pool their resources into, such as the European Aviation Safety Agency and the Single European Sky ATM Research, a project to overhaul European airspace and its air traffic management.
Despite all the above challenges Humphreys believes a deal can be done. Nevertheless he does point to one potential stumbling block.
Spain has previously held up aviation deals because of disagreements with the UK over the sovereignty of the tiny territory of Gibraltar.
What’s to stop them torpedoing an aviation deal unless they get their own way?
Hospitality
The British Hospitality Association estimates that around 15 percent of the sector is made up of migrants from the EU, a figure that represents around 700,000 jobs.
What is most worrying so far is that their future (as well as the future of British people in other EU countries) has not been resolved.
Immigration has become a key issue, post referendum. Free movement of people is one of the cornerstones of the EU but it is highly likely that restrictions will be put in place when Britain leaves.
Even if those that are already in the country are able to stay, the lack of regular arrivals will make it much more difficult for employers.
Ufi Ibrahim, Chief Executive of the British Hospitality Association, the leading tourism body has called for a ten-year timescale to be adopted in order to make it easier for companies to adapt.
“Without EU workers our industry will be unable to welcome visitors from home and abroad and keep the UK going,” she warned.
Tech/start-ups
Possible restrictions on immigration won’t just hurt the hospitality industry, they would also make the UK a less attractive place to start up a business.
At the moment London has a vibrant tech scene, and attracts entrepreneurs from not just Europe but all over the world. If the government goes after immigration will young founders find it quite as attractive a destinations?
May’s speech played heavily on the UK’s position as a “global Britain”, which “will not retreat from the world” but this contrasts heavily with an obsession with cutting immigration.
Research conducted by venture capital firm Balderton Capital suggested that in 2015, 42 percent of start-ups had one non-native founder with these founders raising $2.2 billion (£1.8 billion) in investment.
Protecting the rights of Europeans in the UK and maintaining support for the sector are clearly high priorities for those in the industry
George Northcott, co-founder of Founders Factory, a start-up incubator and accelerator based in London, which counts EasyJet among its backers, said there were some positives to be drawn from May’s speech.
“In general I think there was some false optimism that there was a middle ground that Theresa May was going to try and pursue on the single market and EU membership. After today that clearly isn’t going to happen,” he said.
“However, the tech community can draw some comfort that the right of existing EU nationals to remain in the UK will be protected (provided there is reciprocity); and that the science and innovation communities will be supported. The former is key to the continual success of entrepreneurship in this country and the latter provides some hope that the UK can continue to attract the best talent from across the continent.
“We will be watching very carefully to see if these two statements of intent can be matched by the reality of what will be quite partisan negotiations.”
Tourism
One of the supposed silver linings from the Brexit vote was that the depreciation of the pound would lead to a massive influx of foreign tourists.
Strangely, this doesn’t seemed to have happened.
Figures released by the UK’s office for National Statistics and analyzed by the BHA point to a decline. In the three months to the end of October, although there was an increase in the number of people visiting the UK on business (+2.3 percent) and seeing friends and relatives (+4.3 percent), the number of people coming to the UK on holiday actually fell by 2.2 percent compared with the same period in 2015. It’s worth pointing out that some of this decline could be down to the UK’s hosting of the Rugby World Cup in September and October 2015.
Surprisingly, spending is also down. Over the last three months it has declined by 3 percent versus the same period in 2015.
The government will have to wait a little while longer for a Brexit windfall to materialize.
Tour Operators
The likes of Thomas Cook and TUI Group are in an interesting position. The UK is a significant market for both but they make most of their money outside of it.
So far neither have seen any significant impact from Brexit as consumer spending remains strong and the old cliché of Brits wanting holidays in the sun still stands. Stats from the Office of National Statistics reveal that the number of people taking holidays abroad in the three months to the end of last October increased by 6 percent. Of course most of these holidays were likely booked in advance of Brexit. Nevertheless, it’s still impressive.
There are plenty of reasons to suggest this state of affairs won’t last forever. Spending is being underpinned by continued consumer spending and leisure analyst Mark Brumby of Langton Capital believes the increased cost of going abroad will eventually have an impact – something that won’t have been helped by Theresa May’s speech.
“It’s a bit negative for sterling it won’t react immediately but over the medium term it’s likely to weaken a little bit and that’s going to make over holidays a bit more expensive and make domestic holidays relatively more attractive,” he said.
Source: skift.com