Table of Contents
1. Current Situation
2. Statement of Problem
3. Specific Objectives
4. Research Question
5. Organization of Paper Body
6.1. Hard versus Soft Brexit
7.1. Inbound, Outbound and Domestic Tourism
7.1.1. Inbound Tourism
7.1.2. Outbound Tourism
7.1.3. Domestic Tourism
8. Brexit’s Influence on Tourism
8.1. Inbound Tourism
8.1.1. British Pound Sterling
8.1.2. Travel Restrictions and Tourist Access
8.1.3. Aviation Market
8.1.4. Employment and Skills
8.2. Outbound Tourism
8.2.1. British Pound Sterling
8.2.2. Travel Restrictions and Tourist Access
8.2.3. Aviation Market
8.3. Domestic Tourism
8.3.1. British Pound Sterling
8.3.2. Travel Restrictions and Tourist Access
8.3.3. Aviation Market
10. Critical Reflection
Within this literature review, the impact of Brexit on the United Kingdom’s tourism industry is evaluated. Brexit is a source of much concern, uncertainty and anxiety for the tourism industry for both the United Kingdom and the European Union. The methodology used is content analyses of existing literature, government and industry surveys, as well as media articles concerned with the potential impact of Brexit on the tourism industry. This paper outlines some of the potential consequences Brexit could cause and results argue that the withdrawal from the membership of the European Union could bring up positive as well as negative implications for the United Kingdom’s tourism industry.
1. Current Situation
Within the last years, the impacts and consequences which may occur for countries withdrawing from supranational unions such as the European Union (EU) or the Association of Southeast Asian Nations (ASEAN) have received growing attention. Existing literature already delivers rich insights into the potential negative impact of exiting supranational unions (Lim, 2018, p. 970). Despite this, on 23 June 2016, the United Kingdom (UK) called for a second referendum, since 1975 to decide whether it should remain a member of the EU (Clarke, Goodwin, & Whiteley, 2017, p. 1; Lim, 2018, p. 970).
The referendum resulted in favor of the UK leaving the EU, with 51.9% of British citizens voting to leave (Clarke, Goodwin, & Whiteley, 2017, p. 1; Lim, 2018, p. 970). The result of this referendum in favor of leaving the EU and its notification through a letter on 29 March 2017 triggered the negotiation process which will come to an end after a maximum period of two years (Perles-Ribes, Ramón-Rodríguez, & Ortuño Padilla, 2018, p. 1). It is clear that such events have an impact on tourism (Pappas, 2019, p. 12) and existing research analyzes this issue. Nonetheless, there is still immense uncertainty about several aspects of Brexit; as a cross-border industry, tourism is particularly under threat (McKee & McKee, 2018, p. 134).
2. Statement of Problem
The travel and tourism industry is one of the UK´s most important economic sectors. It is ranked as the fourth biggest industry, employing approximately three million people and contributing nearly £130bn to the UK economy. In addition, the UK’s tourism industry is ranked as the sixth largest in the world (House of Commons, 2018, p. 7), so it is also important to consider the strong travel and tourism flows between the UK and the EU. For instance, is the EU the main destination for UK travelers as well as the main source market for tourists coming to the UK. This, interdependency has been facilitated by the free movement of goods and services, investment and people across the EU. Therefore, Brexit could endanger this free movement, and affect the flow of travel and tourism (ABTA & Deloitte, 2016, p. 2).
As there is still enormous uncertainty about almost every aspect of Brexit, it is hard to predict how the travel and tourism industry will be affected. Nonetheless, it is clear that the UK’s departure will influence the travel and tourism industry both within the UK and across Europe (McKee & McKee, 2018, p. 138). Since the referendum on 23 June 2016, many researchers have investigated the issue at hand and many papers have been published to expound the thoughtful opinions and reasoning given by several experts about the potential consequences of Brexit for the travel and tourism industry (Lim, 2018, p. 970).
Despite this, the existing literature is still very fragmented, and most researchers only focused on specific aspects of how Brexit could influence the travel and tourism industry. For example, Pappas (2019) focused on Brexit’s influence on Londoners’ outbound travel intentions, McKee and McKee (2018) reviewed healthcare and insurance issues, while other authors such as Cirer-Costa (2017), and Perles-Ribes, Ramón-Rodríguez and Ortuño Padilla (2018) concentrated on Brexit’s’ influence on the UK’s outbound tourism and its influence on tourism destinations in Europe.
Although the relevance and the importance of the topic is clear, the existing research does not give a broad enough view of the potential impact on the travel and tourism industry. Therefore, leading researchers have asked to further examine the topic and investigate the complex influences of Brexit (Lim, 2018, p. 973; Pappas, 2019, p. 12).
3. Specific Objectives
Exiting a supranational union like the EU can have an impact on an entire industry. General concerns and risk perceptions related to such events can extensively influence the travel and decision-making process of travelers and as a consequence, the whole travel and tourism industry (Pappas, 2019, p. 12). Although, Brexit has had only a few direct effects on the tourism market so far, it has still resulted in a significant fall in the British Pound Sterling and a decline in the share price of travel and tourism companies (Cirer-Costa, 2017, p. 27; Pappas, 2019, p. 12). Nevertheless, Brexit´s actual effects are still unknown (Pappas, 2019, p. 12) thus more research in this specific area is needed.
Therefore, this paper sets out to investigate the impact Brexit will have on the UK´s tourism industry. In order to do so, extensive literature research was conducted, with existing studies and research papers analyzed and newly structured in this work to give the reader a more holistic perspective and understanding of the issue.
4. Research Question
When taking the above-mentioned Current Situation, Statement of Problem and Specific Objectives into consideration, it results in the following research question, which is answered in this research paper:
“How Will the United Kingdom's Tourism Industry be Affected by Brexit?”.
5. Organization of Paper
The introduction of this paper compromises of a Current Situation Analysis, the Statement of Problem and Specific Objectives of the paper.
The main part of this paper is divided into three main sections: Brexit, Tourism and Brexit´s Influence on Tourism.
In the first part, the phenomenon of Brexit is defined to ensure common understanding with the reader. In addition, the different possibilities how Brexit could look like and what specific meanings those could have are explained.
In the second part, the term ‘tourism’ is defined. In addition, is the reader provided with a definition of and distinction between Inbound-, Outbound- and Domestic Tourism.
In the third part, Brexit’s influence on tourism is outlined. Therefore, the sub-chapters are divided into the three different traditional forms of tourism. In the first sub-chapter Brexit’s influence on inbound tourism is analyzed, followed by the second and third sub-chapter focusing on Brexit’s influence on the outbound and domestic tourism sector.
The paper is then concluded with a Summary, Critical Reflection, Implications and an Outlook for the Future.
In the morning of 24 June 2016, a shockwave went through Britain and several European capitals when it became clear that 51.9% of British citizens voted in favor of leaving the EU (Hobolt, 2016, p. 1260; Goodwin & Heath, 2016, p. 323). Since then, Britain’s impending exit from the EU, commonly shortened to ‘Brexit’, has been ubiquitous (Schoof, Petersen, Aichele, & Felbermayr, 2015, p. 2). In many ways, however, the outcome of the referendum was not surprising. Firstly, the UK has consistently been the most Eurosceptic member of the EU ever since it joined the union in 1973. Secondly, in contrast to the pro-EU position held by most other EU governments, the British government was aggressively opposed to the EU and thereby communicating the Eurosceptic message to the public. Finally, the mainstream anti-establishment message that made the Brexit campaign effective has also led political success across Europe in recent years and was driven by concerns about immigration, loss of national culture, lack of economic opportunities and anger about the political class (Schoof et al., 2015, p. 2; Hobolt, 2016, p. 1260).
The shockwave also hit the economy. Stock markets reacted quickly to the Brexit vote: the British Pound Sterling plummeted to a 31-year low against the US Dollar and over US$2 trillion were wiped off shares worldwide (Hobolt, 2016, p. 1260). However, this shock was not sustained for very long and the stock market recovered to its pre-referendum levels quite quickly and also the British Pound Sterling started to rise again, although it did not reach pre-referendum levels. Nonetheless, the terrible warnings of an immediate economic crisis and fatal short-term effects following a vote to leave had been proved wrong. Notwithstanding, since Brexit has still not happened and the actual effects cannot be precisely predicted, there are concerns that Brexit could have serious long-term consequences for foreign investment in Britain and could damage trade relationships in Europe in the long run (Clarke, Goodwin, & Whiteley, 2017, p. 175). In addition, the insecurity and uncertainty associated to the already complex phenomenon, the impact of Brexit on tourism also strongly depends on whether the negotiation process results in a ‘Hard’ or ‘Soft’ Brexit (Perles-Ribes, Ramón-Rodríguez, & Ortuño Padilla, 2018, p. 1).
6.1. Hard versus Soft Brexit
The terms “Soft” and “Hard” Brexit are defined primarily in terms of the UK/EU post-Brexit political and economic relationship (Menon & Fowler, 2016, p. 8).
A “Soft” Brexit is associated to maintaining the majority of the legal relations between the UK and the EU, thus in terms of the single market, a “Soft” Brexit is commonly understood to mean continued membership. Currently, for non-EU member states this can be secured through a membership in the European Economic Area (EEA). However, to remain a member of the EEA the UK would have to accept all of the EU’s four freedoms, the single market law and be subject to the jurisprudence of the European Court of Justice. This means if the UK and the EU come to an agreement like this, the UK would follow the model of associated states such as Norway, Iceland and Lichtenstein (Menon & Fowler, 2016, p. 8; Perles-Ribes, Ramón-Rodríguez, & Ortuño Padilla, 2018, p. 2).
A “Hard” Brexit is commonly understood as a process that will lead to a definitive rupture between the UK and the EU Acquis Communautaire. This would mean that the UK would be considered as a third state, and as such, the UK would have no preferential relationship with the EU and its single market. The UK’s trade could thereby only rely on the World Trade Organizations (WTO) rules as well as on bilateral agreements currently in force, or the regulations of private international law of each of the member states (Menon & Fowler, 2016, p. 8; Perles-Ribes, Ramón-Rodríguez, & Ortuño Padilla, 2018, p. 2).
Logically, the impacts and consequences of each of the two scenarios on the UK/EU relationship are of course different. The outcome of a “Hard” Brexit would be much more traumatic than that of a “Soft” Brexit in which the effects would probably be minimal (Perles-Ribes, Ramón-Rodríguez, & Ortuño Padilla, 2018, p. 2). Alternatively, there could also be a spectrum of potential solutions in between” Soft” and “Hard” Brexit. For example, could both parties agree on specific regulations for more or fewer categories of goods and services and also laws and regulations such as to allow the free movement of UK/EU citizens. However, where the UK’s eventual relationship with the EU and its single market will land on the spectrum will depend on both the UK’s as well as the EU’s claims and expectations during the negotiation process (Menon & Fowler, 2016, p. 8)