THE LOTUS WEEKLY BREXIT ROUND-UP
The LOTUS Weekly Brexit Round-Up
Frances Tuke summarises the recent Brexit drama gripping Westminster and its impact on the travel industry in this week’s round-up.
Holiday Prices forecast to rise by 31% due to Brexit
The independent.co.uk has reported on a survey by Seasonal Businesses in Travel (SBIT), an organisation representing over 200 outbound British travel companies, that European holiday prices are set to rise by 31 per cent as a result of Brexit and as many as 25,000 UK jobs in the sector may be at risk.
The study claims British companies employing UK staff in Europe may face a 58 per cent increase in costs if they are unable to retain existing British terms, such as paying tax and National Insurance, and are required to pay into more expensive continental state social insurance schemes.
This is before the issue of currency fluctuation is taken into account, as if the pound drops against holiday currencies, prices in destinations will go up. Last week, the pound reached an 11-month low against the Euro and dollar.
Holiday prices set to soar due to currency fluctuations
The Times has reported on how currency fluctuations also impacts on the price of package holidays and accommodation.
Many tour operators have already committed to paying hotels for this winter and next summer’s bookings in euros – often at rates at least five per cent higher than the present exchange rate.
The Times believes that holidaymakers could face surcharges of hundreds of pounds on booked flights and package hotel accommodation later this year if Britain leaves the European Union without a deal.
Further sharp falls in sterling are expected if a no-deal Brexit becomes a reality – and the piece says there is a danger that companies will either pass on the extra costs to consumers or go out of business.
Travel companies are allowed to pass on up to eight per cent in additional costs, but if they are ABTA Members, they have to absorb the first two per cent.
UK Business travellers ‘could be turned away at EU borders’
The Financial Times has reported that British workers travelling to the EU will be unable to carry out even basic business tasks after a no-deal Brexit unless they apply for work permits which could be complicated and take weeks or even months to obtain.
A report has been released by consulting firm EY, which says that British business travellers without the right authorisation could be turned away at EU borders and companies liable for fines if national immigration rules are strictly enforced.
Seema Farazi, head of financial services immigration at EY told the Financial Times: “As of November 1, assuming a no-deal exit on October 31, businesses will have to navigate red lines across each of the EU27. This is a sea change for UK businesses, used to the flexibility that has come with free movement.”
If it leaves without a deal, British citizens will have to apply for work permits on a country-by-country basis if they do more than attend business meetings, networking events or conferences.
The CBI business lobby group warned of “immediate overnight disruption” for UK businesses that sent staff to the EU for work and said companies may eventually relocate operations and jobs to the EU as a result.
Germany is one of a number of countries which has prepared waivers for UK workers on stays of up to three months, but others have stricter rules.
The EU does not provide comprehensive guidance on each country’s requirements, while the UK government directs enquiries on the type of visa needed to each country’s embassy.
Holiday Extras reports record booking day
Holiday Extras beat its previous sales record for a single day on 5 August 2019 and said that British holidaymakers were determined to get away for their week or two in the sun, despite pessimism about currency and consumer confidence.
Matthew Pack Group Chief Executive told Travel Weekly: “With a few sensible precautions, people will still be able to travel whatever the Brexit outcome.
“The next Brexit date isn’t until the end of October and, according to the regular poll we’ve been running since last year, only 2% of British travellers are still putting off their summer holiday plans because of Brexit jitters.”
Plunge in pound triggers On the Beach profit warning
Travel Weekly reported that On the Beach had issued a profits warning on 9 August due to a plunge in sterling amid no-deal Brexit fears.
The online travel company said that it anticipated delivering a full year performance below the board’s expectations and was operating dynamic pricing rather than currency hedged pricing for its holidays.
The statement to the London Stock Exchange said. “Whilst the group has seen strengthening of demand in Q2, this weakening of sterling leads to a significant increase in On the Beach prices versus full risk competitors with currency hedges.
“As On the Beach remains focused on profitable growth, these relative price increases make it difficult for the group to gain share of market while maintaining margins.”
However, the group has continued to increase investment in talent and infrastructure in areas offering the most significant expansion opportunities, despite the difficult market conditions.
Thomas Cook seeks £150m to survive the winter
Thomas Cook is seeking funding of up to £150 million from bondholders to ensure that it can survive through the quieter winter season – and the request comes in addition to the recapitalisation from Fosun that will hand control over to the Chinese conglomerate.
Analysts believe that the collapse of Super Break, Late Rooms and the profit warning from On The Beach as well as Brexit uncertainty and fragile consumer confidence has contributed to the company seeking the extra cash buffer.
UK economy weakensBritain’s economy contracted for the first time in seven years during the second quarter of 2019. The FT said that a combination of Brexit-related uncertainty, stockpiling ahead of the original exit date and global trade tensions all led the economy to shrink by 0.2 per cent compared with the previous three months.
The FT warned that the data could not be a stronger warning to the governing Conservative party not to take further unnecessary risks with an already weak economy.
In what looks increasingly like the government on an election campaign, Sajid Javid, the chancellor, announced more spending pledges and to increase budgets for schools, police, infrastructure and the NHS.
The FT admits some of the weakness is also to do with an overall global slowdown in manufacturing. The US-China trade war and factories in Germany and France are also experiencing downturns. But, it argues, investment in the UK is waning and growth in the service economy, which makes up 80% of the British output, has slowed. Meanwhile the finance sector has contracted for the ninth consecutive quarter. In this light, it is sensible for the Government to relax austerity measures and to raise productivity and improve public services – as well as preventing the UK from the cliff-edge of a no-deal Brexit.
As Parliament doesn’t sit in August, serious papers have few options for hard political news stories, than to resort to speculation during August. This year, the speculative stories on Brexit have proliferated. For example, there has been widespread speculation that the Queen would be called in to sack Mr Johnson if he lost a no-confidence vote and refused to stand down.
Ramping up preparations for a no-deal Brexit
The EU has said that they are not interested in re-opening discussions about the Northern Irish backstop on the withdrawal bill and so the Boris Johnson administration is ramping up preparations for a no-deal Brexit. In the meantime, according to The Sunday Telegraph, there are plans for Boris Johnson to meet with the Irish PM Leo Varadkar, in the hopes of breaking the Brexit deadlock, however Varadkar is adamant that backstop renegotiation will not be on the agenda.
Plot to block Brexit
Today's The Times reveals a leaked paper that ‘exposes plot to block Boris Johnson’s ‘do or die’ no-deal Brexit’. According to the newspaper ‘MPs are drawing up plans to compel Boris Johnson to break his “do or die” pledge and force him to request an 11th-hour Brexit extension from the European Union. A leaked strategy document reveals that Mr Johnson’s opponents believe they can thwart his plans to push through a no-deal Brexit and compel him to hold an election with Britain still in the European Union. They also intend to launch a campaign accusing the prime minister of driving through an illegitimate “scorched earth (no-deal) policy on the British people” that has no democratic mandate.’
MPs have few options to block Brexit says think-tank
However, a report from the think-tank Institute for Government believes that MPs have few options to stop a no-deal Brexit.
Downing Street can simply “ignore” their opposition in Parliament and the study dismissed most of the options as either requiring government co-operation, which is not expected, or would not be sufficient to compel the government to change course.
Brexit Rapid Rebuttal Unit
Michael Gove has set up a rapid rebuttal unit, according to the Telegraph. Chief Political Correspondent, Christopher Hope, explains that ‘individual departments will be tasked by the unit - which is overseen by Mr Gove, the Chancellor of the Duchy of Lancaster who is coordinating no deal planning in the Cabinet Office - with rebutting articles that officials feel exaggerate or misrepresent the dangers of leaving the European Union without a deal on October 31’.
Last Wednesday, Government ministers the Chancellor of the Duchy of Lancaster Michael Gove, Home Secretary Priti Patel and Transport Secretary Grant Shapps visiting Dover to see the preparations at Europe’s busiest ferry port. Shapps said:
“From port infrastructure works to the people working within them, we have set aside millions of pounds so that goods and transport will continue to move in a no-deal scenario.”
Government cements relationships with America
Last week, the Foreign Secretary Dominic Raab and International Trade Secretary Liz Truss travelled to North America to build relationships. In Toronto on Tuesday, Raab and his Canadian counterpart Chrystia Freeland who agreed on “the need for a seamless transition” in terms of providing continuity of trade after Brexit, while in Washington DC, he met President Donald Trump and his administration. On Thursday he went to Mexico to sign a new Partnership Agreement aimed at boosting sustainable and inclusive economic growth in both nations.