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The impact of 'Brexit' on UK tourism

The impact of 'Brexit' on UK tourism

With the peak travel season about to begin, British holidaymakers are set to discover the immediate effects of the Leave vote in increasing prices abroad.

While ABTA has assured travellers that there will be no immediate change in European regulations in the face of the UK vote to exit the European Union (EU), claiming

“People due to travel this summer will see little changes to their holiday.

“Once the UK formally notifies the EU of its intention to leave, the remaining Member States will have up to two years to offer the UK a deal for a future trading relationship and during this period holidaymakers will not see any immediate changes.”

However the association, which said its role was to help keep members informed, boost consumers confidence in travelling, and to help government to understand and prioritise important matters, confirmed the ’fall in pound will have an immediate impact on holidaymakers and their spending power overseas’.

The International Air Transport Association (IATA) released preliminary analysis of the financial and economic impact of the Brexit decision on the air transport industry.

“The Brexit vote has triggered much uncertainty—financial and otherwise.” said Tony Tyler, IATA’s Director General and CEO.

“As leaders in the UK and the EU work to establish a new framework for their relationship, one certainty to guide them is the need and desire of people on both sides of that relationship to travel and trade.

“Air transport plays a major role in making that possible. There were 117 million air passenger journeys between the UK and the EU in 2015.

“Air links facilitate business, support jobs and build prosperity. It is critical that whatever form the new UK-EU relationship takes, it must continue to ensure the common interests of safe, secure, efficient and sustainable air connectivity.” Added Tyler.

The main points of the report are:

•The UK has voted to leave the EU - the so-called ‘Brexit’ scenario. Considerable uncertainty remains regarding the precise detail of the exit and it could be 2 years or more before these issues are fully resolved; prolonged uncertainty will influence both the magnitude and persistence of the economic impacts.

•Preliminary estimates suggest that the number of UK air passengers could be 3-5% lower by 2020, driven by the expected downturn in economic activity and the fall in the sterling exchange rate. The near-term impact on the UK air freight market is less certain, but freight will be affected by lower international trade in the longer term.

•A big issue is with aviation regulation. The UK faces a trade-off between accessing the European Single Aviation Market and having the policy freedom to set its own regulations.

Meanwhile the owner of British Airways has issued a warning that the vote to leave the EU will hit profits, telling investors that they should expect a smaller jump in earnings this year.

International Airlines Group (IAG), which also owns Aer Lingus, Iberia and Vueling, has issued a statement to the stock exchange saying that it believes that the vote to leave the European Union will not have a long term material impact on its business.

In the short term, however, in the run up to the UK referendum during June, IAG experienced a weaker than expected trading environment. Following the outcome of the referendum, and given current market volatility, while
IAG continues to expect a significant increase in operating profit this year, it no longer expects to generate an absolute operating profit increase similar to 2015.

easyJet claims the result of the referendum would not have a material impact on its strategy or its ability to deliver long term sustainable earnings growth and returns to shareholders.

Carolyn McCall, easyJet Chief Executive said: “We remain confident in the strength of easyJet’s business model and our ability to continue to deliver our successful strategy and our leading returns.

“We have today written to the UK Government and the European Commission to ask them to prioritise the UK remaining part of the single EU aviation market, given its importance to trade and consumers.”

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