How Will Brexit affect the Global Tourism Economy?

As uncertainty over the economic and commercial future of Great Britain continues, it becomes increasingly clear that the wallets of the country’s travelers will feel the pinch. The UK’s eventual exit from the EU, dubbed “Brexit,” is a process that is expected to take place over the course of two years or perhaps even longer, so any immediate impacts being felt at the moment — including a rapidly falling British currency — are still premature and not necessarily permanent

By Eliot Bullman Wednesday, July 20, 2016 comments

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What to expect of the Brexit effect on the tourism industry

 

As uncertainty over the economic and commercial future of Great Britain continues, it becomes increasingly clear that the wallets of the country’s travelers will feel the pinch. The UK’s eventual exit from the EU, dubbed “Brexit,” is a process that is expected to take place over the course of two years or perhaps even longer, so any immediate impacts being felt at the moment — including a rapidly falling British currency — are still premature and not necessarily permanent.

 

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However whether it provokes short or long term effect for the British and world economy, a weaker pound naturally affects inbound and outbound travel flows to and from the U.K.

 

The plunge in the value of the pound against the dollar and the euro has made holidays in Britain almost 15 percent cheaper for foreign tourists. As tourists take selfies at the foot of the British parliament’s famous clock tower and at red telephone boxes, there is little talk of what the “Leave” victory in the referendum means for the EU’s future.

 

“A study by Travelzoo, the global media commerce service, has demonstrated that the Brexit could have serious consequences for the British tourism sector. Consumers in Germany, the US, Canada, Italy, France and Spain were surveyed: A third of travelers from Germany, Italy and Spain, and a quarter from France, said they would be less inclined to visit Great Britain if it chose to leave the EU.

 

By contrast,British tourism has the potential to benefit from the weakened pound against the euro,” according to tourism agency VisitBritain. For example, for American travellers with their Superdollars, the fall of sterling means that the British tourism sector is one of the country’s few industries that will quickly see a post-Brexit boost. For the first time in many years a vacation in the U.K. has become a great deal cheaper for its US cousins. The pound’s 11% fall against the U.S. dollar may not yet be at the bottom either.  Before the vote on June 23, Britain’s biggest bank, HSBC, predicted it could fall as low as $1.15.

 

londonOriginal Image: “Tourist Tat” by Mark Ramsay, used under CC BY 2.0 license, via Flickr.

 

Conversely, some Brits are now anxious about the ease and cost of moving around on the continent, but supported Leave because of concerns over regulation.  Leaving the European Union impacts future vacations for those with sterling in their pockets, as a collapsing pound puts a dent in both incomes and euro spending money.  Furthermore  if the UK goes head and invokes Article 50 of the Lisbon Treaty, Britons may encounter problems of free movement on the continent too.

 

The EU-U.S. Open Skies Agreement allows EU and U.S. airlines to fly between any point in both regions, but with the U.K. out of the EU, there may be more restrictions on air travel both to and from the U.K.

 

Brand USA, a U.S. destination-marketing organization, is concerned about inbound tourism from the U.K., the U.S.’s number one source of visitors from overseas. Brexit turmoil is bad news, as it’s harder to attract travelers affected by a weakened currency.

 

Finally, as far as Mexico is concerned, President Peña Nieto recently remarked that the impact on the Mexican economy would be only  ´moderate.´  Mexico has had a free trade agreement with the EU since December 1997. Economy Minister Ildefonso Guajardo said that if Britain were to leave the EU bloc, Mexico would be happy to sign a separate free trade agreement with the UK.