Un­cer­tainty Sur­rounds UK Vote to Leave the EU

Business Traveler (USA) - - UPFRONT -

In a ref­er­en­dum held June 23, Bri­tain has voted to leave the Euro­pean Union. The re­sults sur­prised many an­a­lysts and the busi­ness world, and con­sid­er­able un­cer­tainty re­mains as the de­tails of Bri­tain’s exit are worked out. Ob­servers say it could be two years or more be­fore th­ese is­sues are fully re­solved.

The im­me­di­ate im­pact is likely to be a slow­down in the Bri­tish econ­omy, ac­cord­ing to many an­a­lysts. PwC re­vised its GDP growth pro­jec­tion for the UK in 2016 to 1.6 per­cent, down from 1.9 per­cent, with an even steeper drop in 2017. Growth would then grad­u­ally pick up later in 2017 and be­yond.

The big­gest source of un­cer­tainty, PwC says, is the UK’s fu­ture trad­ing re­la­tion­ship with the EU, mainly be­cause of the lack of prece­dent. For ex­am­ple, it is un­clear whether the UK will be able to con­tinue to ac­cess to the Sin­gle Mar­ket as it cur­rently does now, or have to ne­go­ti­ate a free trade agree­ment, or even have to trade with EU mem­ber states un­der WTO terms.

For the travel in­dus­try, while is it im­pos­si­ble to quan­tify the ex­act ex­tent of the Brexit, most of the im­pact is likely to be on travel con­fi­dence, es­pe­cially busi­ness travel. In avi­a­tion, pre­lim­i­nary es­ti­mates from IATA sug­gest that the num­ber of UK air pas­sen­gers could be 3 to 5 per­cent lower by 2020. Another ma­jor un­known is 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. US busi­ness travel spend­ing is ex­pected to slow this year, grow­ing only 0.9 per­cent to a to­tal of $292.5 bil­lion, ac­cord­ing to the lat­est GBTA BTI Out­look – United States 2016 Q2 re­port from the GBTA Foun­da­tion. The de­cline rep­re­sents a slight down­grade from the pre­vi­ous quar­ter’s fore­cast.

Fac­tors lead­ing to the weaker out­look over the next six months in­clude in­creas­ing risks in the do­mes­tic and global economies, un­cer­tainty lead­ing up to the US pres­i­den­tial elec­tion and the sur­pris­ing vote in the UK to leave the EU. How­ever, the fore­cast go­ing into 2017 is for busi­ness travel to grow 4.2 per­cent ris­ing to $304.9 bil­lion.

Glob­ally the GBTA BTI Out­look – An­nual Global Re­port & Fore­cast, spon­sored by Visa, Inc., found that, de­spite con­tin­ued un­cer­tainty, busi­ness travel spend topped $1.2 tril­lion in 2015, an in­crease of 5 per­cent over 2014. By the end of the cur­rent year, global busi­ness travel spend is pre­dicted to climb to $1.3 tril­lion and post a rise 5.8 per­cent on av­er­age over the next five years, reach­ing $1.6 tril­lion in 2020.

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