Comment: What might Brexit mean for UK travel?

Comment: What might Brexit mean for UK travel?

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Ian Taylor welcomes a report by Abta and Deloitte on the implications of leaving the EU, but wonders at its conclusions.

I looked forward to the Abta and Deloitte report on What Brexit might mean for UK travel. Indeed, I asked about it more than once over recent weeks.

Its publication is welcome. Up to now, too many industry organisations have felt constrained to the point of being unable to offer a view on the implications of Britain leaving the EU.

Only UKinbound has come out with a clear position. Other groups, which might have hoped to take a clear stand, have found – like the British Chambers of Commerce – that their members are uneasy or even split.

Chambers of Commerce director general John Longworth was suspended and subsequently resigned this month after voicing his personal view that Britain might be better off outside the EU.

So, full marks to Abta for consulting its members and engaging Deloitte to produce the report.

The debate up to now has been most remarkable for its paucity, as though politicians on neither side have prepared for the campaign despite this supposedly being a matter of huge importance and principle.

The Abta-Deloitte report contains useful information and notes rightly that: “No one knows for certain what a post-EU UK would look like.”

However, it suggests: “It is possible to assess ... what would be the likely impact of a leave vote on consumer confidence, expectations and behaviour.”

This is more contentious. But don’t take my word for it, take Willie Walsh’s. This is what he told analysts when presenting IAG’s annual results: “We’ve conducted a risk analysis of a decision to leave the EU and don’t see any material risk to our business.”

Maybe Walsh, as head of BA, Iberia, Aer Lingus and Vueling, is out on a limb.

No, here is what Lufthansa chief executive Carsten Spohr told the Aviation Club last month: “When it comes to our industry, being part of a common market is not as important as it is to many others.”

I don’t doubt both Walsh and Spohr would, personally, prefer Britain to remain in the EU. But their views on the impact on the sector are clear.

The airlines most concerned about Brexit are short-haul giants Ryanair and EasyJet, whose chief executive Carolyn McCall is on David Cameron’s business advisory group.

The wider business view is not all one way either. Richard Branson has said leaving the EU would be “very damaging” for Britain. But he lives on Necker Island in the Caribbean so has long since left both Britain and the EU.

The split in the Chambers of Commerce is public knowledge. The CBI has noted a majority of its members favour remaining in the EU but that “there is no uniform business view”.

The Institute of Directors (IoD) noted in a report: “Members support staying in the EU, but this is conditional on seeing a measure of progress on EU reform.” That is not a blanket ‘yes’ and could be said to be the position of some now in the Brexit camp.

Indeed, the IoD took a positive line on the uncertainty everyone in the ‘stay’ campaign has condemned, suggesting: “Business believes that uncertainty arising from the referendum is a price worth paying for EU reform and to settle the question of EU membership.”

There is a growing weight of claims for the harm Brexit could do, but little concrete evidence. At the same time, a report by consultancy Capital Economics, published in February, concluded:

“It’s plausible that Brexit could have a modest negative impact on growth and job creation. But it is slightly more plausible that the impacts will be modestly positive.”

Perhaps the sharpest evidence that Brexit need not be the end of the world as we know it comes from the London Stock Exchange (LSE) and its German suitor, Deutsche Borse.

Surely, Deutsche Borse would not be planning to buy the LSE before the referendum if it feared a Brexit could have wholly negative impact on London equity prices. It must have done a risk analysis.

The bid appears to have been made now because of the referendum, and the Financial Times reports: “LSE and Deutsche Borse say Brexit will not derail the merger.”

What of Abta and Deloitte’s findings? The report neatly summarises these in six points:

1.“There are strong travel and tourism flows between the UK and EU.” This is hardly a finding. It is a fact of geography.

“A Brexit could jeopardise free movement and affect the flow of trade and travel.” What evidence is there for this, given we know nothing of any post-referendum arrangements? We do know the geography won’t change.

2.“In the event the UK votes to leave, there is a high likelihood of uncertainty . . . This could last until a replacement of trading relations and regulations were in pace.” Yes, but would this necessarily affect travel? There is uncertainty about the outcome as it is and outbound bookings appear to be up year on year.

3.“In the event of a Brexit, the value of sterling could be impacted.” Yes, but would sterling “be impacted” up or down? Long-term negative interest rates in the EU could depress the euro against sterling.

4.“In the event of a Brexit it is likely EU regulations that benefit and protect travelling consumers would need to be replaced.” Well, yes, in some cases.

The report suggests six areas – roaming fees, the Package Travel Directive (PTD), freedom of movement, European Health Insurance Card (EHIC), the Consumer Rights Directive and air passenger rights.

This is a mixed bag. The PTD is already enshrined in UK law and the new PTD requires legislation which is already on the agenda, so what change would a Brexit make?

The Consumer Rights Directive is also part of UK law, and European countries outside the EU participate in the EHIC scheme, so no change there.

Removal of EC Regulation 261 on air passengers’ rights might be welcomed by airlines if not by consumers, while the idea that regulatory change would simply increase costs is unfounded when, for example, Thomas Cook had to make a £40 million provision for delay compensation claims under Regulation 261 in 2014.

Would telecom firms really penalise UK consumers by raising roaming fees following a Brexit? There would be a furore if they did.

That leaves freedom of movement, on which the report notes: “Travel requirements for UK-EU travel would depend on the settlement reached [post-Brexit]. However, the UK would be able to seek new bilateral visa agreements with non-EU countries.” So is that wholly negative?

5.Travel and tourism “employ a significant number of immigrants [and] any changes limiting the sector’s ability to employ foreign nationals . . . could challenge many travel and hospitality business in filling roles.”

That is a reasonable point, though we don’t know what arrangements will pertain post-referendum. However, we do know Cameron’s government is pledged to cut immigration if it wins the referendum.

6.“The UK travelling consumer could be faced with increased costs if an exit vote led to a sustained deterioration in the value of sterling.” This is a repeat of point 3 and merely piles supposition on supposition.

I’m afraid I feel none the wiser.

The one fact we might all agree on is that the referendum has introduced uncertainty, and that seems to include uncertainty about what exactly are the benefits of being in or out of the EU.

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