UK. In a stunning result, the UK yesterday voted to leave the European Union after 43 years, prompting the shock resignation of British Prime Minister David Cameron in the past few minutes (08.25 Friday), effective by the Conservative Party conference in October [look for regular updated reaction at the foot of this story].
A nationwide referendum saw the Leave campaign win by 52% to 48%. England and Wales strongly favoured Brexit, while London, Scotland and Northern Ireland backed remaining.
At a press conference outside Downing Street this morning, in which he accepted the peoples’ voice, an emotional Cameron said: “I think the country needs fresh leadership to take it in this new direction in the national interest.”
Earlier he said, “The British people have voted to leave the European Union and their will must be respected. The will of the British people is an instruction that must be delivered.”
Former London Mayor and leader of the Leave campaign Boris Johnson is now the hot favourite to become the country’s new Prime Minister.
As the markets digested the overnight news, the Pound Sterling fell to its lowest level against the US Dollar since 1985. The Bank of England may have to intervene to shore up the currency, according to widespread reports. Bank stocks in particular have plummeted in early trading today.
The UK and European travel retail sector has a very partisan interest in the outcome. A Brexit vote means that duty free sales in the UK to EU-bound travellers could be restored in the future. Similarly, EU-based travel retailers could sell duty free to UK-bound travellers. Duty free sales between EU-member countries were abolished in 1999.
The European Travel Retail Confederation said in a statement issued this morning: “The UK finds itself in an unprecedented situation: no country the size of the UK or with its economic weight has ever left the EU.
“It is impossible to predict exactly what will happen over the coming days and months, and what this means for the duty free and travel retail channels. There are clearly very specific issues surrounding duty free and travel retail, which we need to explore fully with both the UK and EU governments in the coming months. We are also acutely aware of the difficulties that Brexit presents to the UK and EU aviation industry, which will need to be addressed as soon as possible.
“Over the next weeks and months ETRC will be working with the UK Travel Retail Forum (UKTRF) to secure the best possible outcome for the businesses it represents, and to seek clarity as early as possible.”
What next?
David Cameron (or his successor) will activate Article 50 of the 2009 Lisbon Treaty, thus setting in motion the process of withdrawal. Once Article 50 is triggered, there is no way back into the EU unless by unanimous consent from all other member states.
Hume Brophy, the Brussels lobbyists that works closely with the ETRC and the travel retail industry in general, said: “The exit negotiations need to be concluded within two years. At this point the UK’s EU membership ends automatically, unless the European Council agrees unanimously with the UK to extend the negotiating mandate.
“The deal that is done with the UK will be put to the European Parliament for its consent. It then needs the formal approval of a qualified majority of the 27 remaining EU countries, at least 20 countries comprising at least 65% of the population.
“An exit agreement will also have to detail the terms of the UK’s future relationship with the EU. The UK may try to negotiate a close working relationship with the EU like Norway or Iceland as part of the European Economic Area. However, given the campaign clamour to stop contributions to the EU budget, to leave the single market and to limit free movement of people, it is more likely that the UK will prefer a purely trading relationship with the EU under the World Trade Organisation’s rules.”
Political commentators believe public pressure to withdraw from the EU will now escalate in several other European countries. The implications of what is already being dubbed Britain’s ‘Independence Day’ are profound.
Withdrawal from the EU has to be negotiated with the remaining member countries, a process that is meant to be completed within two years.
We’ll bring you comment from travel retail industry leaders and analysis of what yesterday’s historic decision means for the duty free, tourism and aviation sectors through the day.
TRAVEL & TOURISM INDUSTRY REACTION
European Travel Retail Confederation: “Over the next weeks and months ETRC will be working with the UK Travel Retail Forum (UKTRF) to secure the best possible outcome for the businesses it represents, and to seek clarity as early as possible.”
Taking note of the results of yesterday’s UK referendum on EU membership, European airport trade body, ACI EUROPE, calls for the EU and UK aviation markets to remain fully integrated in the future – to safeguard and promote vital air connectivity for consumers as well as continued economic development.
ACI Europe Director General Olivier Jankovec: “The EU and the UK are faced with the challenge of establishing a new relationship. While there is for now much uncertainty as to what will be the model, structure and modus operandi for this new relationship, it will be essential that it allows for the UK and EU aviation markets to remain fully integrated and based on totally aligned – if not common – rules. The EU’s single and fully liberalised aviation market has delivered tremendous benefits for consumers and businesses across Europe – with increased air connectivity at lower fares at its core. By putting so many airports not just on the European but also the global aviation map, the single European aviation market has transformed them into engines of growth for their communities – especially in the regions. We simply cannot afford to go backwards on what is now one of the backbones of our economies.
“Securing legal certainty over the continued integration of the EU and UK aviation markets must be one of the key priorities of the future EU & UK relationship. This is about avoiding any risk in terms of connectivity & business disruption. As the voice of Europe’s airports both within and beyond the EU, ACI Europe will pursue this agenda on behalf of its members.”
International Air Transport Association (IATA) Director General and CEO Tony Tyler: “The Brexit vote has triggered much uncertainty—financial and otherwise. As leaders in the UK and the EU work to establish a new framework for their relationship, one certainty to guide them is the need and desire of people on both sides of that relationship to travel and trade. Air transport plays a major role in making that possible. There were 117 million air passenger journeys between the UK and the EU in 2015. Air links facilitate business, support jobs and build prosperity. It is critical that whatever form the new UK-EU relationship takes, it must continue to ensure the common interests of safe, secure, efficient and sustainable air connectivity.”
IATA statement: “Preliminary estimates 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. A big issue is with 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.”
John Brennan, CEO of Amaris Hospitality (one of the UK and Ireland’s largest hotel investment and hospitality groups): “We are now entering a period of uncertainly as Britain prepares the ground for exit. While the negotiation period could have an affect on the markets overall in the short-term, the hospitality sector is well-placed to remain robust during this period.
“International tourism is one of the most rapidly growing sectors of the UK economy as disposable incomes increase around the world. With Sterling weakening on this news, the rest of the world will get more Pounds for their currency, making the UK a cheaper destination to visit, and conversely making it expensive for Britons going abroad.
“We would, however, encourage government to provide clarity on the exit process and address the areas of uncertainty prompted by this decision as soon as possible.”
The World Travel & Tourism Council (WTTC): We emphasise that travel to, from and within the EU and UK will not be affected in the short term. The process set out by the Lisbon Treaty allows for a two-year period of negotiation once the UK formally states its intention to leave the EU, and this period could even be extended by agreement of all the parties. During this period the legislation around travel & tourism will remain unchanged.
David Scowsill, President & CEO, WTTC, said: “We are entering a period of market uncertainty which will undoubtedly put pressure on Travel & Tourism businesses, however we know that our sector is resilient and we expect business and leisure travel to hold up in the face of these challenges.”
TFWA President Erik Juul-Mortensen: “As yet, it is not possible to predict how Brexit will affect the duty free and travel retail industry, and it is wiser not to make assumptions about exactly what the impact will be.
“The decision will, however, result in a period of considerable uncertainty and will clearly present a number of challenges to the UK and EU duty free and travel retail sector. Together with other trade bodies and stakeholders we will be examining the issues and their consequences fully with EU and UK governments over coming weeks and months so that these issues can be addressed as quickly as possible.
“People will of course however continue to travel, and the duty free and travel retail sector, currently valued at over US$60 billion globally, will remain an important retail channel in the UK as in the rest of the world.”
Hume Brophy: “The UK must now work with the other 27 EU countries to agree how – and how quickly – the UK will leave the EU; and what the future relationship between the UK and the EU will look like.
“We find ourselves in an unprecedented situation: no country, let alone one the size of the UK or with its economic weight, has ever left the EU. While there is a process on paper, nobody really knows how Britain’s departure will play out, or how the remaining 27 EU members, who until today have been observing the UK’s growing hostility without comment, will respond to the UK’s exit demands.
“An emergency meeting of the EU’s finance ministers is likely to take place tonight. The Presidents of the European Council, European Commission and European Parliament will meet at the weekend. And next week’s European Council meeting will be dominated by the referendum result. The UK will be excluded from all of these discussions.”
Will Hawkley, UK Head of Leisure, KPMG UK: “Today’s decision to leave the EU is likely to cause CEOs within the leisure and hospitality sector a great deal of uncertainty and concern. Not only are there vast numbers of EU nationals working in the hospitality sector, but EU supplier and commercial contracts will need to be reviewed, and there will also be concerns over foreign visitor numbers within the industry. All of these factors could have a material impact on operations and revenues.
“On an economic level, it’s fair to predict that today’s result will probably impact consumer confidence, driving down discretionary spend on leisure in the short to medium term while consumers evaluate the full impact of what the UK’s exit from the EU means for them and their wallets.”
International Airlines Group (owner of British Airways, Iberia and Aer Lingus): IAG believes that the vote to leave the European Union will not have a long term material impact on its business. In the short term, however, in the run up to the UK referendum during June, IAG experienced a weaker than expected trading environment. Following the outcome of the referendum, and given current market volatility, while IAG continues to expect a significant increase in operating profit this year, it no longer expects to generate an absolute operating profit increase similar to 2015.”
*Note: IAG shares plummeted by -20% between the start of trading and midday today, to around £4.23.
easyJet statement: “easyJet’s initial focus will be to accelerate discussions with UK and EU governments and regulators to ensure that the UK remains part of the single EU aviation market. This would enable EU airlines to fly freely within the UK and between the UK and EU, allow UK airlines to fly freely across Europe and would ensure that consumers continue to benefit from low fares and would mean easyJet and other airlines can continue to operate as they do now. easyJet will also continue to develop its alternative options that will fully maintain its existing network and operations.”
