Brexit Already Impacting Exports and Tourism

Despite the Prime Minister´s insistence on completing Brexit on time, an amount of uncertainty still remains, with defectors and legal threats looming, but one thing is becoming increasingly clear, the situation is having an impact.

“It is necessary to prepare for the worst”, is the somewhat pessimistic opinion voiced by Spain´s acting Minister of Economy and Business this week when asked about the impact Brexit might have on Spain´s economy. As Director-General for Budget of the European Commission from 2014 to 2018, academic economist Nadia Calviño is seemingly qualified enough to comment.

The Spanish Government is holding internal crisis talks to try to prepare for whatever situation may arise. Whereas some British newspapers are warning of food and medicine shortages and stockpiling, the reality is that the current Brexit situation has already resulted in a loss of almost 300 million euro in exports from the Valencia region to the UK, according to records at the Spanish Institute of Foreign Trade (ICEX).

The Valencia Chamber of Commerce show that the reduction has been in ceramic products, glass, fertilizers, metalwork, plastic, cereals and preserves, textiles and, perhaps of more concern from the warnings, pharmaceuticals.

The agrifood sector has not seen any decline so far in the export of vegetables, sauces, ice cream, wine and coffee, but there has been a 5% drop in citrus fruit, the first time ever this has occurred, although cheaper produce from other countries may also be a contributing factor.

In March a trade agreement was reached between the UK and Spain whereas 87% of products would be “duty free”, in order to make the market more attractive, this agreement was only for the first year, so even the appeal from the softening of sales tax would not last.

Tourism too seems to have taken a hit this year, with the summer about to close many hotels have failed to reach capacity, even in the most popular tourist destinations.

The reduction in tourism is not exclusive to the European family however, as the UK itself is apparently a less attractive destination than it was.

According to a report issued this week by the UK Office for National Statistics, there were 3.1 million visits to the UK by overseas residents in April 2019, representing a drop of 8% compared to the previous year. In May there was also a decline of 6% with 3.3 million visits.

Whereas some may dismiss the reduction of tourism as insignificant, especially as visitors still spent £1.6 billion in the UK in April, that was a considerable drop of 14% compared to last year. The decline wasn´t quite as dramatic in May, as tourism spending was down just 1% to a £2.1 billion shopping spree.

As for UK residents leaving the UK for overseas visits, that too declined, with 4% fewer trips in April, with 6.1 million holidays taken, May flattened out with neither a decline nor increase. There´s good news for Europe hidden in those figures however, as despite the decline in numbers, the Brits spent more when they arrived. Unlike the decline in UK revenue, British tourists spent £3.7 billion on visits overseas in April 2019, which is 11% more than in April 2018. In May they spent £3.7 billion on their holidays abroad, but that is a drop of 3% compared to May 2018.