Can Travel Managers Prep for a No-Deal Brexit?

With only two months until the U.K. exits the European Union on March 29 and no one on this planet knowing what form that departure will take, travel management professionals are sitting frustratedly in limbo. “I’ve never seen an issue with so much uncertainty about what the outcome could be,” said Jo Hillman, senior director of sales for the U.K. and Ireland at Carlson Wagonlit Travel.

The U.K. Parliament remains deadlocked over options ranging from postponement—and potential abandonment—of Brexit to crashing out with no divorce agreement, an outcome that would affect business travel, and indeed everything to do with business, much more drastically. “I don’t know of anyone who has been able to make contingency plans because we are subject to too many ‘what ifs,’” said Tom Stone, partner at consultancy Nina & Pinta. There is no point, for example, in urging employees to avoid travel in the days following Brexit, Stone believes, because “if disruption does occur, and I’m not convinced it will, they won’t fix it in a week.”

Yet, while there is little evidence of travel managers preparing comprehensive strategies, some are taking piecemeal precautions. “We are not actively encouraging or booking London Heathrow as a stopover airport for indirect flights,” said Ruediger Bruss, travel and mobility category manager for German tire manufacturer Continental. However, that is the only decision Continental has taken so far regarding travel. “We are making plans for production, logistics and supply chain, but we will deal with anything around travel when it comes up, just as we would a strike or weather situation,” said Bruss. “It’s not central to our business and completely unknown.”

Some U.K.-based travel managers also are making preparations, according to Sandy Moring, director of education for the U.K. and Ireland’s Institute of Travel Management. In particular, they are rethinking that end of the spectrum where business travel merges into mobility and HR: issues like long-term assignments and relocation. “Companies are looking at whether to place their people into the EU and whether they need to rotate them because they may not be able to settle there,” said Moring. “One travel manager told me she had not used serviced apartment providers before but suddenly they are becoming her best friends.”

Moring also flagged concerns among travel managers whose companies send personnel to emerging economies and are reporting shortages in the U.K. of health essentials like prophylactics for malaria. “These travel managers say there are already some problems in getting medical supplies, and their view is it’s only going to get worse,” Moring said.

Then there is the question of how to advise travelers. Moring said travel managers are urging building more time into trip agendas because of potential extra delays at borders. Clive Wratten, CEO of travel management company Amber Road, said his company is briefing clients about issues like International Driving Permits and passport validity (see Consequences of a No-Deal Brexit below).

TMCs also are having to make their own contingency plans. “We have imposed a staff leave embargo one week either side of 29 March. We feel a bit naked because it is so close and we still don’t know what is going to happen,” Wratten said. Hillman said CWT senior leaders have held numerous planning calls because “if planes are grounded, it will be our job to support clients with their travel plans. It’s very unlikely, but we have to make sure we are ready.”

What is much more likely is disruption to the lives of EU-national employees living in the U.K. and vice versa, a common phenomenon in an inherently cosmopolitan sector like business travel. “Our services are increasingly digital, so for us, it’s more a case of what do we do for people working for us from the EU. We have been taking steps to make sure they are OK,” said Hillman.

Analysis of bookings by CWT suggests Brexit is already affecting business travel. Bookings to and from London City Airport, which largely handles business passengers flying to and from the EU, have fallen markedly since the U.K.’s Brexit referendum in June 2016. At the same time, bookings to Dublin have risen substantially. Financial services companies, in particular, have been relocating jobs to the Irish capital since the referendum, although Dublin has also been thriving as a high-tech hub.

FCM Travel Solutions sees a distinctly mixed picture. “Some clients are cutting spend on internal travel, but it is hard to know if that is Brexit related,” said U.K. general manager Jo Greenfield. “FCM saw 17 of our top 20 U.K. clients up-trade by anything from 5 to 400 percent in 2018. We foresee an increase in travel to and within Europe as companies look to outsource business functions and set up shared services in markets like Poland.”

Consequences of a No-Deal Brexit

Flights: Crucially, the European Commission said in December it would allow flights into and over the EU from the U.K. until March 30, 2020, providing the U.K. reciprocates. But two big concerns need watching. The first is that the European Commission has given guidance that flight volume in 2019 must be capped at 2018 levels. The International Air Transport Association estimates up to 5 million extra seats are scheduled for 2019 and will be "at risk" should no deal happen. "There is legal and commercial uncertainty over how the commission's plan to cap flight numbers will work," said IATA director general and CEO Alexandre de Juniac. The second problem is that the European Commission will make no exceptions to its rule that only airlines majority-owned by European Economic Area—the EU plus Iceland, Liechtenstein and Norway—or Swiss nationals may operate flights within the EU. This is a complex issue involving not only equity but also voting rights and affects EasyJet and Ryanair plus International Airlines Group carriers Aer Lingus, Iberia and Vueling. All have stated they are confident they can comply by March 29, but there is no certainty yet about any of them.

Cost: Banks expect the pound to fall in the event of a no-deal, having already plummeted to and remained at its lowest levels against the U.S. dollar in 25 years, following the 2016 referendum. If the pound falls again, hotel, restaurant and other costs would rise even higher for overseas trips by U.K. travelers. Conversely, prices would theoretically fall further for visitors to the U.K., but there may be inflationary pressures, too. Speaking on condition of anonymity, one travel manager working in the U.K. public sector warned: “Nearly half of hotel staff in the U.K. are non-U.K. nationals, working for wages the British wouldn’t accept. The hotel industry will have to up its wages and pass the cost on, so we run the risk of rates going through the roof.” One other issue to consider is GDP growth or contraction. Barclays has said demand uncertainty caused by a no-deal could push down airfares.

Border Controls: The U.K. government is warning citizens that U.K. passports with less than six months left before expiry may not be accepted by EU countries. Meanwhile, European tourism association ETOA has cautioned travelers to expect longer queues at both ends, with the EU, for example, taking an average of 90 seconds longer to process passport holders from outside the union. Both the EU and U.K. have assured visa-free travel if the other side reciprocates. However, from 2021, U.K. passport holders will have to apply to travel visa-free through the online European Travel Information and Authorisation System, similar to the U.S.’s Electronic System for Travel Authorization.

Insurance: All EU citizens are eligible for European Health Insurance Cards, giving them the right to state-provided healthcare while visiting any EU country. Under a no-deal, EHIC cards for travelers based in the EU would no longer be recognized in the U.K. Meanwhile, U.K. citizens’ EHIC cards would be invalidated everywhere. Travel managers may wish to check their insurance arrangements.

Driving: The U.K.’s Foreign and Commonwealth Office has advised passport holders they may need to carry an International Driving Permit in addition to their driving license when visiting some EU countries.