Brexit: What does it mean for British holidaymakers travelling to Europe?

The freedom for British airlines such as easyJet to fly within and between EU countries could be curtailed

Simon Calder
Wednesday 09 November 2016 10:49 GMT
Travelling across Europe may become more expensive
Travelling across Europe may become more expensive

Our most intense engagement with Europe is when we holiday there.

With the peak travel season about to begin, millions of British holidaymakers are set to discover the immediate effects of the Leave vote in pushing up prices abroad. Longer term, there will be more big changes.

Will holidays cost more?

In the short term, the slide in sterling to its lowest level for years means the price of everything from a cup of coffee in a cafe in Paris to a night in a luxury hotel in the Maldives will rise.

The level of the increase depends on what level the pound settles at: before the referendum, the Treasury predicted sterling would lose 12-15 per cent of its value on a Leave vote.

Longer term, the two key rates are against the euro and the dollar.

The €:£ rate is crucial because we take the majority of our foreign holidays in the single-currency area; the Spanish costas, the French countryside, the cities of Italy and the islands of Greece.

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Further afield, prices in destinations including the US, Dubai and China will rise in proportion with the strength of the dollar relative to sterling; many currencies are locked to the US$.

Even if you never venture beyond Europe, the $:£ rate is also significant. Oil is priced in dollars, as are aircraft. So a 12 per cent fall in sterling will push up the price of petrol, diesel and aviation fuel, as well as the cost of aircraft for airlines such as British Airways and easyJet.

Will I be asked to pay more for my holiday this year - or next?

The Package Travel Regulations allow tour operators to impose surcharges when the cost of a package holiday goes up after you booked because of currency fluctuations or rising fuel costs.

The company must absorb the first 2 per cent of any increase, and if the surcharge goes above 10 per cent then you have the right to cancel.

If you have already paid for your holiday in full, it is unlikely that you will need to pay a surcharge.

The company will probably have hedged its currency requirements for paying airlines and hoteliers. Some firms will also have hedged, at least partially, costs for 2017 holidays.

Anyone who has put together their own trip, and has yet to pay for accommodation or a rental car, will find that the cost in sterling terms has risen.

Will cheap flights disappear?

“Open skies” represents one of the most tangible benefits of European Union membership. Since 1994, any EU airline has been free to fly between any two points in Europe.

The freedom to fly allowed easyJet and Ryanair to flourish, and has forced “legacy” carriers such as BA, Air France and Lufthansa to cut costs and fares. On any European journey you care to name, the typical fare is around half what it was in the early 1990s - and anyone who can be flexible about timing can save even more.

Before the referendum, some in the Remain camp speculated that open skies would be among the first arrangements to be binned.

If the UK negotiates a similar arrangement to Norway, within the European Economic Area (EEA), then little would change; Norwegian, a non-EU budget airline, flies successfully within Europe and from the UK to the US.

If Britain does not reach such an accord, in theory every route between the UK and the EU might need to be renegotiated on a bilateral basis. The bureaucratic logjam would be immense. Similarly, British Airways and Virgin Atlantic have easy access to America because of an EU-US treaty on open skies.

But given that London is the world hub of aviation, and a key destination for dozens of airlines, it looks unlikely that routes to and from the UK will be affected.

The freedom for British airlines such as easyJet to fly within and between EU countries could be curtailed; nations such as France and Italy have in the past been protectionist of their home airlines.

The chance to clip the wings of the likes of easyJet could be welcomed by politicians and airlines in other EU countries - if not by travellers. It is likely that airlines will restructure into separate UK and EU-based corporate entities, adding complexity and cost, and reducing flexibility. Immediately after the result, Carolyn McCall, easyJet's chief executive, said she had written to the UK government and European Commission urging them "to prioritise the UK remaining part of the single EU aviation market".

How will passengers’ rights be affected?

The EU stipulates care and compensation in the event of disruption for airline passengers (and, to a limited extent, international train and ferry travellers).

These automatic rights would end for UK airlines when flying from British airports, though EU airlines ‒ including Ryanair ‒ would continue to be governed by them. It is possible that a future British government would create its own rules on passenger rights.

Could using our phones abroad cost more?

Another tangible benefit for EU consumers has been the squeeze on the excessive roaming charges levied by mobile phone companies.

The maximum surcharges phone firms can add for calls, texts and data while abroad have just been reduced again. By next June they will disappear completely; that will happen despite the vote to leave.

Once Britain leaves, it is difficult to imagine any UK government saying to the mobile-phone firms: “As we’re out of the EU now, feel free to bring back excessive roaming charges.”

In addition, mobile phone companies will start demonstrating a year from now that they can survive on zero roaming fees within Europe, and it may be that competitive pressure is sufficient to keep a lid on price rises.

What about British people who live in other EU countries?

The immediate impact for those who depend on savings or pensions in sterling is that the cost of living will rise; the exact amount depends on how the local currency strengthens against the pound. Longer term, the automatic right to live and work in EU countries will end, but it is likely that long-term expatriates will be able to stay.

UK passports and driving licences are “EU-branded”. Will we need to get new ones?

No, and for the time being new UK driving licences will continue to show the EU symbol and British passports will bear words “European Union” on the cover. But within a few years, when you renew either your passport or driving licence the design will change.

Some say we’ll need visas to go to Europe?

During the campaign some elements of the Remain side hinted darkly that we’ll all be queuing up outside the Spanish Embassy before we’re allowed to go to Benidorm.

The Green MP Caroline Lucas said that, in the event of the UK leaving the Single Market, “We would need to have visas”.

Yet the UK is second only to Germany in terms of the tourists it exports to other countries. Britain runs a massive “tourism deficit” (the excess of what we spend abroad compared with what we earn from foreign tourists), much to the benefit of bartenders from Benidorm to Benitses.

The suggestion that the governments of Spain, Greece, Portugal, etc would single out Britons for tougher treatment at the border is far-fetched. We will simply continue to show our passports on arrival, as we do now - as the UK is outside the Schengen Area.

Will there be border controls on the land frontier between Northern Ireland and the Republic?

Unlikely. There has been largely unrestricted travel between the two countries since 1921 under the terms of a Common Travel Area (which also includes the Isle of Man).

The government says: "A person who has been examined for the purpose of immigration control at the point at which he entered the area does not normally require leave to enter any other part of it."

The Republic of Ireland will probably remain outside Schengen, and the current absence of frontier posts will probably continue.

We’re told always to travel to Europe with our EHICs. Presumably health care will get more expensive and travel insurance costs will rise?

European Health Insurance Cards indicate entitlement to public health care on the same basis as local people in EU countries.

But before joining the EEC (as was), the UK had reciprocal health agreements with many European nations.

We still maintain bilateral deals with 16 countries, such as Australia, New Zealand and the former Yugoslavian republics of Macedonia, Montenegro and Serbia.

It is likely that a similar range of deals would be concluded with some or all EU members. If they are not, then the need for travel insurance will increase - and premiums could rise.

What about duty-free?

When the UK leaves, it is likely that the limits that apply elsewhere in the world will be re-imposed. For alcohol, that means one litre of spirits, four litres of wine and 16 litres of beer.

The tobacco limit will be 200 cigarettes. In addition, a limit of “other goods” of £390 will be imposed.

A silver lining for airlines and cross-Channel ferry operators is that proper duty free would return; anyone who currently promises “duty free” for a journey within the EU is fibbing.

What will change for British motorists in Europe?

No more filling up the boot with cheap claret in Calais. In addition, fuel prices and motorway tolls will be more expensive in sterling terms. Current legislation means any car insured in one EU country is automatically insured to the minimum legal level in any other EU country. This will not apply once the UK leaves the EU, but many insurers will continue to extend comprehensive cover for short European trips either free or at a reasonable cost.

Looking at the UK tourist industry, the slump in sterling is presumable a benefit?

With weaker sterling, the rest of the world will get more pounds for its euros, dollars, yen, etc, making the UK a cheaper destination to visit.

Conversely, going abroad becomes more expensive for the British traveller, who may then choose to holiday in Cornwall rather than the Costa del Sol.

But it’s more complicated than that, especially in terms of British holidaymakers’ behaviour. Demand for overseas travel is price-inelastic.

If people find foreign holidays significantly more expensive, some may opt to stay in the UK. But between the summers of 2008 and 2009, when the cost of going abroad increased by roughly 25 per cent, the number of overseas trips by British holidaymakers reduced by a much smaller percentage.

Looking at foreign visitors coming here: EU rules allow European citizens to come to Britain with only a national identity card.

The UK government could re-impose the rule that all foreign nationals must have a passport, though the British travel industry would lobby strongly against anything that makes it more difficult for many EU citizens to visit the UK.

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