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Air travel into and out of the U.K. likely will fall 3
to 5 percent by 2020 because of Brexit, KPMG Brexit Centre of Excellence
director Rohitesh Dhawan said at the recent Business Travel Show. However,
there will be a short-term spike in travel by banks and professional services
firms as M&A activity rises. The sharp devaluation of the pound following
the June 2016 referendum vote for the U.K. to leave the EU has made British
companies an attractive M&A target for businesses based elsewhere in the
One reason Dhawan expects business travel to fall
will be a loss of jobs from the City of London to other financial centers in
the rest of the EU and elsewhere in the world. Dhawan said employers in several
sectors have stopped hiring in the U.K. and others are considering replacing
human labor with automation instead of shifting operations elsewhere in the EU.
Dhawan spoke on a panel with both Mark Cuschieri,
chairman of the U.K. and Ireland's Institute of Travel Management, and
Association of British Travel Agents chief executive Mark Tanzer. Notably, the
session identified no upsides from Brexit for business travel, only risks that
need to be managed. "The biggest risk is the volatility of the
pound," said Dhawan. "You have to factor in the currency risk and how
you plan for that." Cuschieri said a survey of ITM buyer members found 70
percent expect their air costs to rise as a result of Brexit and 63 percent
expect higher hotel costs.
Another concern raised by the panel was entry for U.K.
visitors to EU states and vice versa. "Judging from the mood music when I
was in Brussels last week, there will be less free movement than there is
now," said Dhawan. "Hopefully, sense will prevail, but there will be
at least another area of checks." Cuschieri added, "Anything that
changes freedom of movement adds complexity." This week, U.K. immigration
minister Robert Goodwill told parliament the EU is considering a version of the
U.S.'s Electronic System for Travel Authorization for visitors from Visa Waiver
Program countries. If so, this might apply to U.K. visitors to EU countries.
Economic logic will give way to political logic, so things that don't make economic sense will get waved through."
Freedom of movement for airlines also needs to be addressed
urgently. Commercial aviation is deregulated for carriers registered within the
EU. The U.K.-registered EasyJet, for example, currently can fly from the U.K.
to other EU countries. The EU's Open Skies agreements with the U.S. and other
countries no longer will include the U.K. "Aviation agreements are not
covered by the World Trade Organization," said Tanzer. "The [U.K.]
government has to realize this needs to be covered within the two-year time frame
[of Article 50, the official notice a country must give of its intention to
leave the EU]."
Dhawan said: " Open Skies should be high on the
list, but who knows?" He added later, "Economic logic will give way
to political logic, so things that don't make economic sense will get waved through."
Noting that the Trump presidency in the U.S. has
the potential to "overshadow" any Brexit-related risks to business
travel, Dhawan said corporations need to rethink their entire approach to risk
management. "Political risk is no longer just a developing-country
project," he said. "It's now a developed-country project, too. You
have to include it in your planning."