Brexit: How Might it Affect UK Holidaymakers?

Update: This piece was published prior to the referendum on 24 June, 2016. We've left the copy unchanged, as much of the detail remains relevant.  

There's just no escaping it - the news right now is dominated by the EU referendum. Debating the wider political and financial impact of Brexit is one thing, but we wanted to look at what it could mean for the average UK holidaymaker.  

Instead of just speculating, we decided go out and ask people - Travelzoo members specifially - how they felt about the prospect of the UK leaving the EU.

Fears over rising flight prices & a weaker exchange rate

The top-line results mirrored those of current polls in the UK, with 45% in the “remain” camp and 40% looking to leave. So, still enough floating voters to swing it either way.

However, 28% of those we polled in the UK said they were concerned that withdrawal could lead to more expensive holidays. And from what many industry leaders are saying, they’re right to be concerned. The CEOs of easyJet and Ryanair have all been public in their support of staying in, saying that Brexit is “highly likely” to lead to higher flight prices.

Two main factors are at play here. The first relates to the European Common Aviation Area (ECAA), which was set up by the EU. This abolished charges and restrictions for flying between EU countries and is credited with delivering more competition, allowing low-cost carriers to flourish.

EasyJet estimates the ECAA to have helped reduce prices by around 40% and expand the number of routes being served by over 180%. Admittedly the British, Irish and Dutch mutually agreed to similar terms prior to the EU, but it’s just one of many things that would need to be renegotiated following a vote to leave.

UK airlines seem unanimously of the opinion that, without the ECAA, we could be looking at reduced competition, fewer routes and higher prices. 

The second factor is the exchange rate. Forecasts vary from a 15% drop in the value of the pound (from the government) to as much as 20%, as estimated by Goldman Sachs. No one is suggesting a strengthening of the pound.

This might be matched by a fall in the value of the euro, but a fall against other non-EU countries seems inevitable. Remember that fuel is priced in dollars, so if the pound suffers against the dollar, it follows that we’ll see an increase in flight prices. More importantly perhaps is the impact on prices abroad – as the pound suffers, so the cost of accommodation and food there goes up.

Impact on travel insurance & mobile roaming charges

There are other factors to consider too. Take the EHIC card (previously the E1-11), which gives EU members the right to health treatment in any EU country on the same terms as local residents. Losing these rights would likely lead to higher travel insurance premiums to cover the increased costs from medical claims, an issue flagged by one in four of those responding to our survey.

With strain on the NHS from migrants being a key issue in the debate, we just don’t know if the terms of the EHIC would be replicated once outside the EU.

Likewise, potential increases in mobile roaming charges (frequently the source of a large and expensive post-holiday surprise), were noted as a concern by 24% of our survey respondents. In May of this year we saw the biggest reduction in charges for citizens within the EU. Previous caps of 0.20€ on 1MB of data and 0.19€ for one minute of outbound voice calls have been reduced to 0.05€, a 75% reduction. As with all the other issues in the debate, this legislation would need to be agreed and reinstated following a departure from the EU.

An end to freedom of movement?

More so than increased insurance costs or roaming charges, the biggest concern from our UK results was the potential impact on free movement around the EU. Over half of those voting to remain highlighted “enjoying free movement around the EU” as a reason for staying, second behind the benefits of free trade.

Despite being the biggest concern, I feel this is the least likely to change were we to leave the EU. According to a recent ABTA report, over 29 million Brits travel to the EU each year for holidays (10 million to Spain, 6 million to France and around 2 million to each of Greece, Portugal and Italy). The £20 billion in spending that delivers into the EU means that adding visa restrictions or tourist taxes would be highly unlikely.

As with much of the debate on the issue, there are real and genuine concerns around the economic impact of leaving and the implications on costs and choice for the individual traveller. Yes, everything we leave behind could be renegotiated, but many of those in the travel industry see the benefits of remaining outweighing those of voting to leave.