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July/August 2017
For Business, Corporate Travel & Meeting Buyers & Arrangers

Brexit: the fog of uncertainty

Brexit montage

How will Brexit impact the travel industry? BBT peers into a future in which even the basics are unknown

Devotees of the seemingly-endless QI re-runs on Dave will be aware that there are some questions to which the answer is ‘nobody knows’. The first panellist to raise his or her question-mark paddle is awarded an unknown number of points under a scoring system which nobody understands.

Fully nine months after the UK electorate voted to leave the European Union, prime minister Theresa May finally decreed that March 29 2017 should be D-Day – the ‘D’ for ‘departure’ – and thus began the process of extricating the country, after 44 years, from the politico-economic partnership.

Then, just as BBT thought it was safe to go to press, the prime minister decided to throw another spanner in the works by calling a general election. The  impact of this? At time of writing, ‘nobody knows’...

Theresa May’s mandate to hand in the UK’s resignation is only the beginning of the beginning: the other 27 EU members now have to agree on a common approach to Brexit – currently France wants punitive measures, Germany is taking a middle line, while the likes of Malta and Estonia presumably couldn’t care either way.

No EU-wide accord is expected before the summer break (if then), and then no serious business is expected to be conducted before September. The UK’s window of negotiating opportunity is reduced to just 18 months. From a corporate travel perspective, that potentially constitutes another year-and-a-half of uncertainty.

Business as usual?

Are we bothered? Apparently not. As Nigel Turner, Carlson Wagonlit Travel’s recently retired senior director of programme management, puts it: “Concerns following the referendum result turned out to be unfounded. The world hasn’t collapsed.”

Adam Knights, ATPI Group’s UK managing director, says: “If the negotiations are difficult and fraught, people might start to think differently, but for the time being companies are just getting on with business as usual. I don’t think triggering Article 50 will change anything – it’s what comes later that matters.

“I watch our travel turnover, and it kind of matches the stock market and the economy generally, so if I take our overall business, it’s up – not a great deal, but definitely up – so it would seem there is no Brexit effect at the moment.

“The type of clients that we as a travel management company deal with tend not to do lots and lots of European travel – they tend to book that for themselves, because there is not a lot of value that a TMC can create if you’re just going backwards and forwards to Amsterdam. TMCs come into their own when there is a bigger global requirement.

“I’m not convinced we are going to see a huge Brexit impact anyway – at least not yet. I think we all thought that when it [the referendum result] was announced, but it didn’t happen.”

It’s those two little words “not yet” that are key to the whole Brexit debate. Anecdotal evidence suggests that the corporate travel community’s prime concern centres, unsurprisingly, on individuals’ freedom of movement.

Trade barriers and tariffs matter, of course, but trade will inevitably continue. According to HM Revenue & Customs, the UK bought £19.5 billions’ worth of goods from other EU members in January alone, and that figure does not include services. Of that total, imports of goods from Germany amounted to £5.1 billion.

It seems unlikely that Angela Merkel will want to become embroiled in a tit-for-tat trade war that might imperil that revenue stream, not least because Germany goes to the polls on September 24 this year and she will want to hang on to her job.

Providing hospitality

Freedom of movement between the UK and the EU is an altogether thornier issue. At one level, UK citizens will eventually need new passports. We could be denied access to the (relatively) fast-track immigration channels at airports.

Even in the worst-case scenario, in which UK travellers could be required to apply for visas to travel to EU member states, these remain inconveniences. The freedom of movement of labour – the inalienable right of EU citizens to work in any other country – has far greater implications.

US investment bank Goldman Sachs, which employs around 6,000 people in the UK, has already announced that it will be moving many of its staff to continental Europe before 2019. Other US banks are believed to be considering similar moves.

However, travel buyers in the banking sector seem unconcerned. “The financial sector doesn’t work on a ‘nation-by-nation’ basis,” said one. “It’s a global business, and London is seen as an international financial centre, rather than a UK or British one. You might see a shift in travel patterns and volumes, but people will still need to come here.”

According to estimates by FullFact, an independent fact-checking charity, there are around 3.2 million citizens of other EU states living in the UK, making up around 5 per cent of the population. Of those, 2.3 million are in employment – or “stealing our jobs” as the more rabid extremists would have it – making up 7 per cent of the UK’s total working population.

Of the 900,000 who are not in paid employment, the majority are students, followed by those who are simply married to UK citizens.

The Brexiteers’ ‘immigration’ hand has been wildly over-played. It is inconceivable that the UK could, let alone would, deport them all. To hinder or bar future migration to the UK from EU nations would have serious implications for UK productivity – not least in the hospitality sector.

The British Hospitality Association (BHA) estimates that there are more than 700,000 EU nationals currently working in the industry in the UK. “Without EU workers our industry will be unable to welcome visitors from home and abroad and keep the UK going,” BHA chief executive Ufi Ibrahim warns.

Ibrahim has called for a ten-year “implementation period” – an amnesty in all but name – whereby EU nationals employed in the hospitality sector “continue to be welcomed into the UK”.

She has some influential allies. The independent Migration Observatory at Oxford University believes that hospitality is likely to be the sector most seriously disadvantaged by changes to immigration rules arising out of Brexit.

The Confederation of British Industry (CBI) estimates that migrant workers make up 25 per cent of the UK’s hospitality, leisure and tourism workforce, and argues that “any immigration system must take account of skills gaps and labour shortages”.

Any new curbs that make the country a less pleasant place in which to do business – for domestic as well as international corporate travellers – will certainly make travel managers’ and buyers’ lives much more difficult.

CBI warns on business visitors

The CBI has come up with other travel-related issues that will need to be resolved – notably, the little matter of mutual recognition of drivers’ licences – and warns: “Any drop in confidence and national GDP, for example, may lead companies to restrict spending on travel and hospitality. This is important as, currently, business visitors make up 25 per cent of all visitors to the UK, with the average business visitor spending 50 per cent more than the average leisure visitor.”

Wings Travel Management COO Paul East is beginning to see a change of mood. “Over the past six to nine months, we didn’t really see any uncertainty or changes to travel bookings, but now that the government is triggering Article 50, and there is no definitive direction, clients have said to us that Brexit is starting to come into their thinking – especially clients in the financial sector.”

American Express GBT has warned that businesses are “tired of the uncertainty” surrounding Brexit. “There is no way of knowing what will come out of the negotiations,” says vice-president Jason Geall. “The uncertainty is not going away any time soon, which is not good for business.”

Geall adds that it is the “duty” of the travel management community to help businesses “navigate through this period” and ensure “travel policies and programmes are prepared for any changes”.

What might those changes be? Wave that QI paddle – ‘nobody knows’...

EU flying regulations open skies

It’s a fair bet that few BBT readers will be overly familiar with the terms of Article 15 of the European Union’s Regulation 1008/20086. But a failure by the UK’s Brexit negotiators to agree a deal on this obscure legislation could have far-reaching implications.

In a nutshell, Article 15 guarantees the freedom of Europe’s skies – any airline registered in an EU member state has the right to fly any route within the Union. In theory, if the UK does not reach a new aviation deal before Brexit becomes a reality, the rights enshrined in Article 15 would no longer apply to UK-registered airlines.

Again in theory, ex-UK flights to any or all of the 27 remaining EU members could be suspended, with the (admittedly remote) possibility that the government might then have to negotiate old-style bilateral air service agreements with individual nations.

That is the spectre summoned up by a briefing document published on March 29 – the day Theresa May’s farewell letter was sent to European Council president Donald Tusk – by specialist aviation lawyers at law firm Watson Farley & Williams (WF&W).

As the WF&W briefing explains: “With no deal, the UK will leave the EU’s single aviation market, traffic rights will be reduced, inhibiting transport between the UK and the EU, and between the UK and certain third countries, including the USA.

“Each industry will have its own reason to seek a special post-Brexit deal. Aviation’s case is founded on its direct contribution to the economy and indirect contribution to so much economic activity in other industries. The UK and EU should therefore agree an ambitious open skies deal, which ideally maintains the status quo.

“The UK Government, however, has a lot to negotiate in the next two years and a new open skies treaty with the EU may not have priority. But it should.”

BBT readers won’t argue with that.

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