EUROPE. The duty free industry will see strong short- and long-term gains across Europe once the UK officially leaves the European Union, according to new analysis.

Swiss research agency m1nd-set has reported that even in the event of a ‘hard Brexit’ the impact on the industry will remain favourable. Even though traffic between the UK and EU countries in such a scenario is forecast to be up to -6% lower than in the event of a ‘soft Brexit’, by 2035 the total UK air travel market will still be over +45% higher than it was in 2015. The figure would top +55% in the event of a soft Brexit.

The data was compiled through m1nd-set ’s Business 1ntelligence Service (B1S), which includes both shopper behaviour and air traffic forecasting tool provided through IATA and ARC’s ‘Direct Data Service’ (DDS) database. The Moodie Davitt Report has partnered with m1nd-set and its B1S service for the reporting of key airports and commercial tenders data.

The m1nd-set analysis also focused on the ‘net gain’ for the duty free market as a result of Brexit by measuring passenger movements for every flight to and from some 1,500 airports. The analysis further identified the increased percentage of passengers who would benefit from duty free purchases.

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The UK’s ‘net gain’ will be the largest, with over +54% more passengers qualifying for duty free purchases on UK-EU routes. Ireland also stands to see strong gains in eligible duty free purchasers at just below +40% net gain. Five out of the top ten countries that will see the most positive impact are from Central and Eastern Europe: Slovakia, Poland, Lithuania, Bulgaria and Slovenia. Malta, Cyprus and Spain are also among the top ten countries that will see the biggest potential gains.

M1nd-set Owner & CEO Peter Mohn: “The restitution of duty free sales on these UK-Europe routes may well present an unprecedented opportunity to all retailers”

“The analysis is particularly beneficial to retailers as it demonstrates the net gain on an individual airport basis,” m1nd-set commented. “Given that some UK airports have most, if not all flight movements with EU countries, the impact on the number of eligible passengers is even more significant.”

UK airports such as Bournemouth, Doncaster, the East Midlands and Leeds, London Stansted and London Southend will see gains of around +90%, the research agency said, while Scotland’s Glasgow Prestwick Airport will see 100% of its passengers eligible for duty free purchases in a post-Brexit scenario. “Even some of the larger UK airports such as Gatwick, Manchester, Liverpool, Luton and Birmingham will also experience significant net gains of above +60%. Opportunities for increasing penetration into the duty free shops are all the more feasible in these locations,” m1nd-set said.

M1nd-set Owner & CEO Peter Mohn commented: “This type of analysis is imperative to both suppliers and retailers as their pricing strategy at some airports in particular will need to be adjusted. The restitution of duty free sales on these UK-Europe routes may well present an unprecedented opportunity to all retailers to reposition the duty free shops as a place for great value shopping. It’s an extremely rare occurrence for retailers to see overnight growth of their potential customer base and all stakeholders need to think on how this opportunity can be best put to the industry’s advantage.”

Pablo Saez-Gil, Senior Consultant at m1nd-set and responsible for the Business 1ntelligence Service, added: “The data suggests the Brexit negotiations about the return of a duty free status for travel retail sales between the UK and the EU are likely to be extremely difficult. The potential benefits from lifting the duty free exemptions on routes between UK and the EU-27 are unevenly distributed across European airports, even within each country.

“Retailers, airports, cruise and ferry companies, airlines and regulators will have each very different incentives and the lack of a shared position on the matter may undermine the negotiations.”