Brexit - The Effect on Business Travel Between the UK and Europe

Now that the momentous decision to leave the EU has been made a question many business people are asking is how will the UK leaving the EU impact on business travel between the UK and Europe and vice versa? This article gives an overview of the views of a number of people including those from the business sector, the UK government, EU parliament, IATA and ABTA.

Despite many experts giving their opinions, they are just that: 'opinions'. No one knows for sure what the state of business travel will be once the dust settles and the UK is no longer part of the EU. In fact we are a very long way from knowing the final outcome. As Jurga McCluskey, head of UK immigration at Deloitte says "Nobody really understands the complexity of leaving the EU because no one has ever left the club."

In fact the process to start the move of the UK out of the EU may not start for a number of months. So bearing in mind that we are at least two years away from leaving the EU many things may change between then and now depending on how negotiations go.

Freedom of Movement

In the short term nothing will change with regards to freedom of movement and UK business travellers will still be able to move freely between EU countries.

The Association of British Travel Agents (ABTA) have said "travellers are as free to move between the UK and the EU as they were before the vote. European Health Insurance cards are still valid and air passenger rights continue to apply. Once the UK formally notifies the EU of its intention to leave, the remaining member states will have up to two years to offer the UK a deal for a future trading relationship."

Justice minister Dominic Raab has suggested that in the longer term visas or 'some other kind of check' may be required to travel across Europe. He further went on to say "the issue would be a matter for post-withdrawal negotiations with the EU, but could not be ruled out if Britain wanted more secure borders. I think we'd have to look at that as part of the negotiations in detail. But look, at the moment president Barack Obama's administration . . . is looking at new visa requirements and screening from Germany, Belgium, Greece, France, because of the recent terrorist attacks."

However most other commentators expect a deal to be negotiated whereby UK travellers have to show their passports at European borders, but will not be required to apply for a visa for standard business travel. To reinforce this when we consider how many EU countries benefit from UK tourism it would seem that treating British travellers at the borders of other EU countries any differently could do those countries more harm than good. Therefore travel for conferences, meetings and other standard business purposes is unlikely to be impeded.

Cost of Travel

One immediate impact has been a drop in the value of the pound to a 31-year low against the dollar. Although this will be welcomed by companies who export to the EU and beyond, as it makes goods and services less expensive, it may mean travel and hotel rates will be more expensive. The cost of travel is likely to rise for the simple reason that oil is priced in US dollars and as a consequence petrol, diesel, and aviation fuel prices may all go up. Even the cost of aircraft is priced in US dollars, so airlines that need to invest in new aircraft will pay more, likely resulting in an increase in ticket prices.

As a result of the EU 'open skies' policy which created a single European aviation area that permitted any EU airline to fly anywhere in the EU since 1994 - budget airlines like EasyJet have grown, in turn forcing companies such as BA and Air France to reduce prices in order to remain competitive. Since its introduction, fares have fallen by around 40% whilst routes have increased by 180%. When the UK is no longer part of the EU, new air service agreements might have to be negotiated, competition could be reduced and fares could rise again.

Mobile Phone Charges

In the past mobile phone companies have charged 'roaming charges' for anyone using their phone outside the UK. In recent years, the cost of using a mobile phone in Europe has dramatically decreased and from June 2017 roaming charges in the EU are due to be abolished completely, saving business travellers millions of pounds in charges. Leaving the EU could see these prices rise once again.

Unfortunately even Ed Vaizey, the Minister of State for Culture and the Digital Economy, when asked what would happen to the roaming charge caps should the UK vote to leave the EU said "I don't know what would happen if we leave the EU, and that's the problem. They might stay, or they might not stay."

The controls on roaming charges are being introduced under an EU regulation - not a directive - which means they have not been specifically incorporated into UK law. This means the UK would need to decide whether it wanted to keep them or not. However, given the level of competition between telecommunication companies in the UK, it is unlikely that any mobile provider would choose to re-introduce European roaming charges, but this is not guaranteed.

Flight Delay Compensation

Like mobile phone charges flight delay compensation may also be affected. Under the current European legislation EC Regulation 261/2004, British travellers, business and domestic, are entitled to compensation in the event of flight cancellations and delays. However around 60% of flights which are currently eligible for compensation per year would no longer be covered. EUclaim, who monitor all European airlines, commented "Thanks to the EC Regulation 261/2004 legislation, an estimated £2.7 billion in compensation has been made available to UK travellers since 2011. This financial penalty led to a 32 per cent decrease in flight delays last year, compared to 2011 when there were 17,434 delays reported by the company. But this regulation will no longer be binding when the country leaves the EU, leaving airlines with little or no incentive to do their best to avoid the steep financial penalties currently issued under the current ruling on flight compensation."

This is disputed by Tony Tyler, the director general and CEO of the International Air Transport Association (IATA) who says "The European Common Aviation Area is already wider than the EU and includes non-EU member states such as Norway and Iceland. One very plausible outcome is that Britain would remain within the Common Aviation Area, in which case nothing very much would change."

Medical Coverage

Companies may face the cost of having to provide medical treatment which is currently free or discounted in EU countries. Presently, our EU membership helps protect business travellers by providing access to cheap travel insurance and free healthcare.

According to ABTA, Brexit is likely to increase the cost of travel insurance within the EU. However it's important to note that before entering the EU the UK had health deals with many European countries and it should be possible to re-negotiate the same or better deals outside the EU, since reciprocal agreements will benefit both parties.

Duty of Care

Businesses have a corporate duty of care and a legal requirement to properly prepare their employees for travel and support them during and after their business trips. These responsibilities could be at risk if the ability of countries within the EU to work together was compromised.

Former MI6 boss, Sir John Sawers has been quoted as saying "Recent terrorist incidents in Paris and Brussels, which involved perpetrators crossing European borders, have demonstrated the vital importance of stepping up inter-country cooperation to protect against terrorist acts, or (in the worst case scenario) at least ensure that perpetrators are caught swiftly and prevented from committing further atrocities. While the UK negotiates a new deal, which hopefully will include the sharing of security intelligence with our neighbours, it is essential that we meet our duty-of-care responsibilities towards travellers."

After Brexit - Looking To The Future

Freedom of movement, reduced flight costs, roaming charges, medical insurance along with other things that we've had access to as part of the EU will need to be negotiated as the UK leaves the EU. Moving forward there are three possible options:

The European Economic Area

The UK is currently a member of the European Economic Area (EEA) along with 27 other members of the EU plus Norway, Liechtenstein, Iceland and Switzerland who are part of the European Free Trade Association (EFTA) which operates in parallel with the EU.

The EEA, established on 1 January 1994, is defined as 'the area which provides for the free movement of persons, goods, services and capital within the European Single Market but not areas including policies such as those relating to agriculture, social and employment law, justice and home affairs'. One of the options open to the UK after Brexit would be to leave the EU but remain a member of the EEA. In this instance the UK would need to continue to honour the agreement of the so-called "four freedoms" of the EU, in which people, goods, services and capital move freely among members.

Sarah Gogan, immigration partner at Fladgate LLP commented "You are signing up to a single common market and free movement so many things would remain the same including the EHIC [European Health Insurance Card] and the European Driving License. This would be the best case scenario."

However this may not play well as it would mean the UK making concessions on the free movement of people.

The Swiss Model

An alternative would be for the UK to forge separate bilateral trade agreements with the EU to allow it to participate in the single market in some areas. An example of this would be Switzerland who voted against membership of the European Union in the early 1990s.

A member of the European Parliament commented "While Switzerland is not part of the EEA; it remains a member of EFTA. It has more than 120 sectoral bilateral treaties linking the country with the EU giving it largely the same provisions as those adopted by the other EEA countries in the fields of the free movement of people, goods, services and capital."

However the Swiss model is limited in that it only has partial access to the EU's single market and services. The bilateral agreements Switzerland have negotiated do not provide for cross-border access in financial services which could have a major impact on the UK's services industry. Switzerland also has no control over EU standards on exported goods regulations and isn't part of the meetings where this legislation is defined. Another issue would be immigration. Part of the Swiss trade 'deal' is a commitment to accept EU rules and regulations which includes free movement. This may again be a sticking point if the UK wants to restrict the movement of people from other EU countries.

A Clean Slate

It may be that the two options above would not meet the UK's need to have control over who comes into the UK, as voiced during the vote to leave the EU. In this case we would have to look at beginning afresh and forging new trade agreements with our European neighbours which didn't involve being part of the EAA or EFTA and which would allow us to set our own rules on immigration and freedom of movement. Clearly this would not be an easy process or a short term endeavour, if at all possible, and would require a great deal of negotiation.

Jurga McCluskey, head of immigration at Deloitte UK makes the point that "Any changes in travel regimes however are likely to be part of much bigger negotiations over trade rules and long-term migration. Visa-free travel, EHIC and even the abolition of mobile roaming charges that the EU is due to introduce next year would need to be negotiated separately and may take years to complete."

Moving Forward

While the UK is still part of the EU very little will change. As the process to leave the EU starts to take shape there is likely to be a certain degree of uncertainty and some businesses may decide to review their travel plans. Whether now or in the future it always makes good business sense for companies to review their travel policy to ensure it is up to date and clearly defined so that all employees have a clear understanding of their entitlements and requirements and the company's expectations when travelling.

Strategic account management and proactive support from an experienced hotel booking agent and travel manager will be even more crucial than ever to help businesses achieve savings, while at the same time ensuring the quality of the service received is maintained and the safety of its employees is not compromised.

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