IMPACT OF BREXIT ON UK INDUSTRY
Identify and discuss the possible impact of the referendum result which took place on 23rd June 2016As CEO of a business write a short business report to your local government based on the UK’s withdrawal from the EU and the impact of this on your area of business/ interest.
INTRODUCTION
The reasons for Brexit may have been sovereignty, economic interdependence, immigration, and security. However, UK’s decision to quit the European Union has been met with a mixed reaction. Yet, much as the decision is yet to bear out its effects across industries, the reaction to this decisive and historical event has been a mixed bag (The economic consequences of leaving the EU of leaving the EU, 2014). While many feel that not much would change as far as growth and industrial output is concerned, others were pessimistic in the short term. The long term however, is not expected to be as bleak with the economy set on the trajectory of recovery. The impact that Brexit would be having on the aviation industry is one of the toughest challenges for the country (Ting, 2016). The situation has been created by a highly tense atmosphere as other countries within the Union too fear a backlash of some sort.
BREXIT AND IMPACT ON AVIATION PRICES
A long drawn-out process that would stretch out to at least 2 years, Brexit has kicked off with a sharp decline in the British pound which hit its lowest in 30 years (Coldwell, 2016). The prices of stocks also plunged along with the pound. Aviation and hospitality are in fact being highly recommended as long-term buys by many analysts’ (Ting, 2016). The short-term outlook indeed looks bleak due to the declining markets (Casian, 2016). Yet there remains a silver lining, with airfare going southwards across the board (Coldwell, 2016). One of the most expected outcomes of the exit would be seeing several low-cost carriers being denied access to the Heathrow airport, thus helping the British carriers to enjoy the privilege at premium prices. While the travelers would have to shell out a little extra, the news still harbors well for the UK aviation industry (Ting, 2016) despite the uncertainty that hangs over it today.
The negativity centers around the uncertainty, impact of a fall in outbound flights as well as travel for business and trade. While the exit would contribute to a small fall in GDP in the short term, this would get corrected as the pound strengthens (PWC, 2016), leading to significant growth in the aviation sector in the UK. This short-term transition period is expected to last from 2016 through 2019 and is expected to have a profound impact on the various airlines operating out of the country. Connectivity in the long term would be impacted through higher fares as well as fewer flights connecting the isles with other European countries (Coldwell, 2016). Yet if a free trade agreement were to be worked out, the short-term impact may also be mitigated as the migration of tourists from European countries would not be affected in any manner.
BREXIT AND IMPACT ON THE GLOBAL TOURISM INDUSTRY AND REGULATIONS
As the United Kingdom voted themselves out of the European Union, by a thin margin the global community stood watching in shock, wondering why (Ting, 2016). This sense of shock has now been replaced by the understanding that with Heathrow being an outbound market, the European Union was one of the major sources of tourists for the UK. While most of the major airlines are still debating their policies, the short-term effects are now coming into the open. Q3and Q4 would see the regulators and governmental agencies looking at inputs from major players in the aviation space. However, global tourism per se would not be impacted to a greater degree, particularly in the long term (IATA, 2016). It would merely be the uncertainty over the matter that is holding many travelers back at this juncture. These aviation companies would also have to now take a firm stand on the manner in which they would be continuing their operations in view of the changed circumstances (ABTA, 2016).
Furthermore, the lack of easy access to airports and airspace across the other European countries within the EU would also impact the ease with which UK-based companies would operate their flights (Casian, 2016). Thus the growth would be limited to a certain degree. Although not as dramatically as those opposed to the move are advocating. However, the disturbing thought in the background centers around the lack of economic growth and development due to the decline of the local aviation industry. Therefore, the British regulators are open to the idea of allowing the aviations rules in Europe to be governed by a separate council rather than lose the privileges that come across from being a part of the European Union (Casian, 2016), thereby minimizing the impact of this historical decision on the aviation industry in the country.
CONCLUSION
The shockwaves that were seen to extend globally on the basis of the close-cut British referendum; are sure to have a regulatory and economic perspective. Despite the falling global influence internationally and minor short-term losses; the British aviation industry would stand to benefit in the long run. While the exit is still in its early stages and the actual implications are yet to be fully known, tourism is an industry that is governed more by sentiment than by economic considerations. The possibility of the impact of Brexit on global tourism being long-term or intense is highly improbable (Ting, 2016). While remaining within the EU would have ensured that British travelers’ continued to feel highly secure while travelling across Europe, matters are now set to change following the referendum (Coldwell, 2016). However, the United Kingdom is poise to reach out for a potion in the aviation markets post Brexit.
References
ABTA, (2016). What Brexit might mean for UK travel. [online] London: ABTA. Available at: https://www.instituteofhospitality.org/Publications/Insight_e-newsletter/2016_News/april/abta_deloitte_report [Accessed 18 Dec. 2016].
Casian, D. (2016). UK aviation industry faces post-Brexit challenges despite likely increase of tourists. [online] International Business Times UK. Available at: http://www.ibtimes.co.uk/uk-aviation-industry-faces-post-brexit-challenges-despite-likely-increase-tourists-1571363 [Accessed 18 Dec. 2016].
Coldwell, W. (2016). What does Brexit mean for travel?. [online] the Guardian. Available at: https://www.theguardian.com/travel/2016/jun/24/what-does-brexit-mean-for-travel [Accessed 18 Dec. 2016].
IATA, (2016). The impact of ‘BREXIT’ on UK Air Transport. [online] Available at: https://www.iata.org/whatwedo/Documents/economics/impact_of_brexit.pdf [Accessed 18 Dec. 2016].
PWC, (2016). Leaving the EU: Implications for the UK econo. [online] London: PWC. Available at: http://www.pwc.co.uk/economic-services/assets/leaving-the-eu-implications-for-the-uk-economy.pdf [Accessed 18 Dec. 2016].
Ting, D. (2016). What the Brexit Vote Means for the Global Tourism Industry. [online] Available at: https://skift.com/2016/06/24/what-the-brexit-vote-means-for-the-global-tourism-industry/ [Accessed 18 Dec. 2016].
The economic consequences of leaving the EU of leaving the EU. (2014). London: Centre for European Reform.
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