Euromonitor expects Brexit will ‘lead to loss of 2.3 million visitors to UK’ by 2020
Market researcher Euromonitor is predicting 2.3 million fewer visitors to the UK over the 5 years up to 2020 following the UK’s Brexit vote. Euromonitor (a leading global independent provider of strategic market research) forecast a 2% drop in GDP over the next 5 years, with the biggest impact felt in 2017. They do not expect GDP to return to the baseline until 2023. Euromonitor says the UK ranked 6th globally in 2015 as a destination country. The UK is highly dependent on European tourists, with around 73% of all inbound tourism in 2015. The largest number of visits to the UK is from France (3.7 million in 2015) and they are fairly resilient to price changes. But based on what happened in the recession, Euromonitor anticipates that there may be less demand from Germany and the US, with perhaps half a million less visitors from each till 2020. Due to the likely fall in the value of the £ against the € and the $, trips will be more expensive for Brits going abroad. However, this could make trips cheaper for visitors coming to the UK – but this effect will be over-ridden as there are more outbound than inbound trips. It took 8 years for the UK travel demand to rebound after the 2008 recession. IATA has warned that UK air passenger numbers could decline 3% – 5% by 2020 due to airline uncertainties and fall in the £.
Brexit will ‘lead to loss of 2.3 million visitors to UK’
Market researcher Euromonitor is predicting 2.3 million fewer visitors to the UK over the five years up to 2020 following the UK’s vote to leave the European Union.
It said that as the UK had entered a ‘period of uncertainty with many unknowns’, it forecast a 2% drop in GDP over the next five years, with the biggest impact felt next year.
The GDP would not return to the baseline until 2023, said Euromonitor.
Head of travel research Caroline Bremner said: “Destination branding and consumer desire to travel would be hit hard by the uncertainty Brexit would entail in the short to mid-term.
“EU source markets, such as Ireland, Germany and Spain along with the US would experience the sharpest forecast change in volume. However, a pound slump after Brexit would help to entice visitors to the UK.”
The UK is high up on the scale of popular destinations, ranked sixth globally in 2015, with an impressive 35.4 million international trips, worth £28 billion to the UK economy, said Euromonitor.
It has a high dependency on Western and Eastern Europe for its international tourists, with both regions accounting for 73% of all inbound tourism in 2015.
France is the UK’s biggest and robust source market, with 3.7 million visitors to the UK in 2015, and has exhibited a high level of resilience to external factors in turbulent times.
Based on previous travel behaviour during times of uncertainty and weaker economic performance at home, Germans and Americans are less likely to travel to the UK, and Euromonitor expects that each country will send half a million fewer people here between 2015 and 2020 to reach 3.3 million and 3.5 million respectively.
Following the global recession in 2008, it took eight years for UK outbound demand to recover to its original levels pre-crisis, only achieving levels of over 78 million outbound trips in 2015.
In value sales terms, the outbound market lost over £10 billion from its peak in 2008 and bottomed out in 2013 when the outbound market started to pick up again thanks to pent-up demand and a stronger economy.
“The sharp fall was not just a result of demand collapsing, but also the removal of unprofitable low-costs deals and players, with major tour operators reducing supply to maximise average transaction prices,” said Euromonitor.
Euromonitor say of themselves: “Euromonitor International is the world’s leading independent provider of strategic market research. We create data and analysis on thousands of products and services around the world.”
IATA warns UK air passengers could decline 3% – 5% by 2020 due to airline uncertainties and fall in the £
Following the UK’s June 23 vote to leave the European Union, IATA said preliminary estimates suggest UK air passengers could decline 3%-5% by 2020, following an expected economic downturn and predicted falling £ exchange rates. IATA’s evaluation of the impact of Brexit notes that there is considerable uncertainty on details and timescale. A weak £ could make trips to the UK cheaper, but as there are far more outbound trips from the UK than inbound, and foreign trips for Brits going abroad will cost more, the net impact is lower numbers of passengers. A possible future path for the UK aviation sector would be membership in the European Common Aviation Area (ECAA).That would enable the UK to have continued access to the Single Aviation Market. However, it requires acceptance of EU aviation law across all areas, limiting the UK’s policy freedom. IATS says: “The same would apply to regulations more generally if the UK were to join the European Economic Area. For example, the strongest legal impediment to airport expansion comes from EU local air quality rules which would still apply to the UK if EU membership were exchanged for EEA membership.” IAG’s share price fell immediately, and easyJet wrote to the UK government and the EC to ask them to prioritise the UK remaining part of the single EU aviation market. BMI said it might “have to review” its bases in the UK.
Also, from AEF:
“The pound has fallen significantly in value and the last time this happened (during the 2008 recession), the number of air passengers decreased considerably as people cut down on flying. Preliminary estimates by the airline association, IATA, 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.”
“Flights to and from the EU are, meanwhile, an important and significant component of the UK’s aviation industry. The EU is easily the single biggest destination market from the UK, according to IATA, accounting for 49% of passengers and 54% of scheduled commercial flights. EU countries account for the majority of UK holiday destinations, with 76% of UK holidays being taken in the EU. In addition, 68% of business visits from the UK are to EU countries, and 73% of business visitors to the UK are from EU countries. Whether or not all these flights will be sustained in the future depends on the UK’s relationship with the EU after Brexit, especially if there is a restriction imposed on the free movement of people into and out of the UK.”
CASE STUDY: COULD BREXIT IMPACT TRAVEL TO BRITISH HOMES ABROAD?
From ABTA and Deloitte – pre EU Referendum
? May 2016
The free movement of people across the EU has contributed to frequent travel between Member States and the decision by many UK citizens to take up property in countries such as France, Spain, and Portugal, either as their main or second home.
There are an estimated 1.3 million UK nationals living elsewhere within the EU. In 2014, more than 8.7 million visits were made by UK residents visiting friends and relatives (VFR) in other EU countries. VFR traffic is vitally important in ensuring the economic feasibility of many air routes.
The emergence of low cost airlines has increased competition and helped to cut prices for consumers in the airline industry. As the cost of travel has reduced, consumers have been able to take more frequent trips and in some cases even commute between two different European countries.
“The low cost airlines have helped to create huge social change in travel behaviour and it has been a big benefit to the consumer”, says Andrew Swaffield, the CEO of Monarch Group, the parent company for the UK based low cost carrier Monarch Airlines.
“We estimate that we fill circa 2 million seats a year with travellers that travel between the UK and their homes in Europe. We see a huge number of travellers with British names travelling with us one way between the UK and key European destinations”.
If the UK were to exit the EU, Monarch would view the outcomes for the travel sector as very negative, not least because of the uncertainty that would follow in the aftermath. “This sweating period after the exit would be very damaging for the sector. [An exit] would most likely lead to higher air fares and fewer scheduled flights between the EU and UK. It could also bring an end to the European Health Insurance Card and shared tax laws that benefit many British home owners and expatriates living in the EU.”
Travel to EU destinations accounted (2014) for 64% of the UK passenger outbound flow. In 2014 56% of travel and tourism spending by British residents went to EU countries (£19.76bn). 44% of inbound travel and tourism spending in the UK is by EU nationals (£9.55bn in 2014).