London is a famously expensive destination. It’s also one of the most popular dream destinations for tourists – us included. So, travelers may be looking at the UK’s break with the EU differently than others. While there is plenty of debate over the wisdom of the Brexit, and effects that will ripple around the world through coming years, everyone who has the UK on their Bucket List is wondering one thing: Is the Brexit an opportunity to visit the UK for less?
The short answer is yes. And no. No, because relative to places like Hanoi or Warsaw, historically on the lower end of the cost index, travel to the UK, and London in particular, is not likely to slide to the bottom of the Budget Buster Scale. But, in many ways, yes; travel to and in the Kingdom may be more affordable for many.
Your (Insert Currency Here) is Worth More
By the end of Day One, A.B. (After Brexit), the pound had taken a beating, down against all major currencies. The practical upshot for travelers is that your currency is worth more today in the UK than it was yesterday. Good news if you’re visiting now or in the near future. That is likely to rebound in time, so “first movers” are likely to benefit the most.
In the long run, things may not be so rosy. The Bank of England is predicting a recession as the effects of leaving the EU take effect, and warns of inflation from the suddenly higher cost of imported goods and materials. Your dollar may continue to be worth more but, once in-country, your costs may eventually be higher.
Air Fare May Go Down…
…but a lot depends on where you’re coming from, and where you’re going to. Many fares to the UK have already dropped, simply because local currencies are worth more relative to the Pound. That makes today a great time to start shopping for your flights to Europe and the UK. On the other side of the pond, a weaker Pound means even fewer Brits will be exploring the world. That may translate to cheaper flights as airlines try to lure other travelers to make up the difference.
But the positive benefit of a strong dollar may be very short lived. While fares to Europe and the UK went down after the vote, operating costs for many carriers went up at the same. Jet fuel is priced in U.S. Dollars, which means England is paying more at the pump today, and will continue to do so until the Pound strengthens.
While currencies have an immediate effect, there are bigger – and deeper – implications for the aviation industry. As the UK leaves the European Union, travel patterns are expected to shift. Investors foresee a reduction of business travel in and to the UK, which means lower demand for flights. Post-Brexit, analysts expect fewer flights and higher prices.
Airlines May Go Down
Airlines may be the first casualty in this battle. The day after the Brexit vote, all UK airline stocks took a plunge. British bank HSBC downgraded all European air carriers to “reduce” recommendations, prompting investors to sell. IAG Group, the parent of British Airways, already downgraded earnings expectations due to Brexit impacts. Even American carriers, who get less than ten percent of earnings from the UK, were down. Around the world, stocks reacted badly to the vote, but airlines were particularly hard hit.
Another problem, and probably the biggest headache for the airlines, is that new agreements must be forged with EU nations. Previous to the Brexit, the UK enjoyed being part of the EU’s single aviation market, which allows airlines to fly freely to and within member states. Industry experts expect the UK to work out an agreement to remain part of a single aviation market, but there are no guarantees and, so far, no timetables for when that will happen.
Travel Without Borders
One thing that will not change is the ease of traveling to and through the United Kingdom for most foreigners. European border crossings were largely abolished by the Shengen Agreement, which is distinctly different than the European Union. Under that agreement, 26 European countries operate much like a single state with no internal border controls. The UK and Ireland had an opt-out opportunity at the Shengen Convention; they declined to use it then, and are not expected to now.
Globalism Relies on Tourism
Many see the Brexit vote as a strike against Globalism but, as travelers, we know the true drivers of globalization are not governments, but their citizens. As global citizens, we know that any opportunity to see new places and meet new people is golden. In the short term, the Brexit works in our favor. In the long term, as global citizens, our travel can help ensure it does not leave the UK isolated.
*Apologies to Hubert Selby, Jr. and Mark Knopfler. This post has absolutely nothing to do with the controversial book or the excellent movie soundtrack Last Exit to Brooklyn, we just liked the sound of it.
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