BREXIT TO SLOW EUROPE’S BUSINESS TRAVEL SPENDING… BUT NOT IN SHORT TERM

The Global Business Travel Association (GBTA) forecasts weakness in business travel development in the mid-term as Brexit decisions are set to reshape relations between the UK and the rest of the European Union.

According to a special report about trends in business travel in Western Europe published by the Global Business Travel Association (GBTA) – the BTI Outlook, the decision of the UK to leave the European Union will have an impact on future travel patterns within the EU.

The GBTA is an institution with over 9,000 members who manage more than US$345 billion of global business travel and meetings expenditures annually.

So far, last June’s referendum about the UK quitting the European Union has barely had an effect on Europe’s economic activities. According to the GBTA, “Consumers are consuming and businesses are hiring, investing and travelling for now.”

But the association forecasts that if spending has so far been resilient, investment in the short term is coming to a halt due to uncertainties about Europe’s evolution. This will automatically translate into a slowdown in business travel.

New rules between the UK and Europe with a redefined relationship on different terms might then create challenges for business travel across the continent, especially as the UK government seems for now to move into a hard-line Brexit with little compromises with the EU.

The specific effects on business travel that GBTA foresees include:

  • End to the free movement of people and money between the UK and the EU. The end of open skies for UK airlines would be felt especially on airline activities. One of the most exposed might be low cost carriers – Easyjet being a typical example. A UK airline based in the EU would then be forced to either leave the continent or to create a subsidiary within the EU to further benefit of the single market’s advantages.
  • New financial burdens on travel: Imposed new taxes on UK-Europe flights – such as air taxes – would increase fares. Hikes in prices could be further exacerbated by fewer flights. It could also eventually translate into higher costs for other fields linked to business such as increased in mobile roaming charges, additional costs for the use of credit cards, additional fees on exchange rates and higher cost for travel insurances on trips.
  • Travel Friction: The debate over immigration could lead to extreme new UK visa requirements, which would likely be reciprocated across the EU. Coupled with rising security concerns in a new separated world, business travellers may face more difficulty and scrutiny moving throughout the EU.
  • Location Decisions: Establishing restrictions on the right for EU citizens to work in any member state will have profound longer-term impacts on business travel levels and patterns.

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POSITIVE OUTLOOK FOR 2017 DESPITE CONCERNS FOR FUTURE

Nothing will change in 2017 due to the two-year procedure once Article 50 is called by the UK FOR the termination of its European Union membership. According to the GBTA BTI Outlook – Western Europe report for the five largest business travel markets in Europe (Germany, the United Kingdom, France, Italy and Spain), growth on travel spending is likely to continue. Western Europe’s business travel spending is projected to increase to $210.7 billion USD in 2016 and top out at $220.6 billion USD in 2017, a 6.0% and 4.7% growth respectively over the previous years. The five markets represent together up to 70% of all Western Europe total business travel market movements and spending.

GBTA projects Germany to continue to lead the growth in business travel spending from 2015-2017, with a 7.5 percent compound annual growth rate increase, followed by Spain (6.5 percent), the United Kingdom (4.7 percent), France (4.2 percent) and Italy (2.6 percent).

The UK remains the most uncertain market. In its outlook, GBTA sees more challenges next year as many companies could reduce their exposure and their investments. Business analysts expect a slowdown in the UK’s economic growth in 2017. Business travel spending would consequently slow down from +6.9% this year to +2.4% in 2017. The slowdown would be even greater for international business travel spending with growth being reduced from +8.9% in 2016 to only +2.3% next year.

France, Europe’s third largest business travel market, is less buoyant than its neighbours as the country continues to face economic difficulties. Total spending will only be up by 4% on average. To the contrary, Spain is expected to have one of the fastest growth rates in business travel spending in 2016 and 2017, second only to Germany. Italy would be one of the worst performers for total business travel spending due to political uncertainties and bleak economic perspectives.

Article by LUC CITRINOT