Saturday, 25 June 2016

Brexit vote pushes up travel costs

Touring France - cost rises
Holidays in the immediate future look certain to be more expensive in the aftermath of the Brexit vote. And the choice of flights from the UK could shrink as airlines forecast the number of Britons travelling abroad by air could drop severely. The £ was down approximately 4.6% against the euro today compared with its value on on Thursday and 7.4% against the US dollar. So far the impact has been significant, though not quite as severe as that feared by the investor George Soros shortly before the referendum. Nobody can predict how sterling will move in the longer term, but it can be predicted confidently that for those on tight budgets travel costs will remain very uncertain for some time. Visitors to this website leaving on holiday in the next few days should have no difficulty working out the immediate effect. But I'll do the sums anyway. If you were driving to France, for example, and had been expecting to spend, say, £2500 for two while there , the cost will be a minimum of £115 more than if the country had voted remain. The increase on a holiday to the US with the same amount of spending on the ground envisaged will be a little higher at £185. What's not immediately clear is the impact on tour operators' prices. Unless there is some unexpected early recovery in sterling their costs will also rise. But many operators - and certainly the larger ones - will have bought some or all of the currency they need to pay for hotels rooms, for example, on the forward markets. So they should not need to up their package prices unless they gambled that a vote to remain would prompt a significant jump in the value of sterling. The International Air Transport Association, whose membership includes the world's major carriers , warns the number of UK passengers could fall by 3% - 5% by 2020. Carriers including easyJet have moved to reassure customers that there will be no short term effect but have urged the Government to treat the future of open skies in Europe as a priority. I must repeat earlier warnings that unless the present agreement survives - and EU airlines are still able to operate between any of the countries covered, choice of destinations will shrink. The same will inevitably happen if stopping the free movement of labour means passenger traffic is reduced. This could affect routes to central and eastern Europe in particular. The eventual effect of such shrinkage could also be a time in fares - but that threat is some way off. One key question is whether EHIC (the European Health Insurance Card) will survive Brexit. For the time being there will be no change. It's always advisable to buy private insurance in any cases EHIC doesn't cover all costs- such as that of an ambulance to hospital. Protection for package travellers against the collapse of tour operators will also remain in place and, because of the massive weight of work now necessary to renegotiate more important arrangements with Europe, may survive in its present form for some years.

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