Economic Aspect: Brexit; Macro economic challenges faced EU
In or Out - Potential Impact of Brexit on UK Travel and Tourism
1. In or Out? Potential Impact of Brexit on UK Travel and
Tourism
Opinion | 25 Feb 2016
Brexit is front of mind as David Cameron, the
UK Prime Minister, announced the date for the
in/out referendum on the UK's place in the EU
as 23 June 2016. The next few months of
campaigning will lead to great debate and
polemic, along with fear-mongering, not just in the UK, but also around the world, at a
time when the global economy is fast running out of steam.
Down with the pound
We are already witnessing a slide in the pound against the US dollar as the uncertainty
surrounding the UK threat of exiting the EU takes its toll. As a destination, a devalued
currency makes the UK more attractive to potential visitors, however, the UK's travel
and tourism industry has a negative balance of trade, where outbound travel far
outweighs inbound, so the positive impact would be limited. In 2016, 34 million inbound
visitors are forecast, with 64% coming from Europe - clearly, imposing restrictions on
travel and introducing visas and additional border controls would have a major impact
on inbound tourism.
After Hong Kong, London is the second most-visited city in the world by international
tourists, with 17.4 million visitors in 2014. Yet, with the UK set loose from Europe, the
capital is likely to see an exodus of global corporations and this could damage the
city's reputation as a global financial hub. The knock-on effect would seriously
undermine the lucrative business travel market, which accounts for roughly 20% of
visitors and 30% of spending per year in the capital.
Trending in reverse
To get a sense of the potential impact on arrivals to the UK after a Brexit vote to
leave, we can review the impact of accession of countries to the EU, when the EU
welcomed new members over the past 15 years and the boost gained from freedom to
travel.
On average, the uplift to arrivals after accession was almost 7%. Our current
expectations for the UK inbound market are 2% arrivals growth over 2015/2016 thanks
to the UK's strong economy and post-Olympics revival. With a reverse move to exit
the UK, this would lead the UK into negative territory in terms of inbound growth
performance.
Coupled with the impact of recession and the uncertainty of at least two to seven
years whilst the UK renegotiates its borders, trade relations, tariffs and duties with the
rest of Europe, this could lead to a worst-case scenario of over 15% decline in
volume, with even greater impact on tourism receipts, as prices fall to stimulate
demand as the shockwaves are felt across the travel industry and broader economy.
Caroline Bremner
Head of Travel
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2. Historic Impact of European Union Accession on Arrivals
Note: Accession for all countries in 2004, except Croatia in 2013 and Romania and
Bulgaria in 2007
UK Arrivals % Growth Scenarios Post Brexit
Source: Euromonitor International
Opportunity vs risk
With a weak pound, UK hotels, attractions and lodging providers like short-term rental
players may see an uplift, although this may be offset by the negative damage that
Brexit will have around the world, with the UK and its population seen as shunning the
democratic values shared by 500 million people across Europe.
There will be a threat to outbound tourism as travel abroad becomes more expensive,
which would impact airlines and intermediaries especially, with easyJet's Carolyn McCall
one of many voicing concerns about the negative effects Brexit would have on not
just their business, but on the overall airline industry in Europe, making air travel much
more expensive.
Leap into the dark will require fresh thinking
Following a potential Brexit, a period of introspection is likely to occur as the British
people come to terms with their new independence and future role in the world, just
like when Japan withdrew from the global marketplace following its recession in the
1990s or Iceland after the global economic crisis and its banking collapse.
To move forward and transform the UK as a destination, a process of creative
destruction of previous national tourism strategy will be necessary and the national
tourism board would enter a stage of crisis management in the short term, and would
then need to develop a destination brand recovery strategy to help overcome long-
term reputational damage to its brand.
New EU Member Year of Accession % Growth PPT Uplift Year After Accession
Romania 28.8 24.6
Lithuania 20.7 16.3
Hungary 10.9 13.1
Estonia 19.7 12.4
Czech Republic 18.4 11.4
Cyprus 2.0 6.8
Poland 4.2 6.1
Slovenia 9.2 3.7
Malta 2.6 3.2
Slovakia 1.0 1.9
Croatia 5.6 1.1
Latvia 11.1 -3.4
Bulgaria -0.1 -6.7
Average 6.9
Arrivals (Trips) % Growth 2015/2016
Exit -7
Exit and recession -12
Exit, recession other -15
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