Brexit threatens to undermine London’s business destination reputation

London is in danger of losing its reputation as a good place to do business because of Brexit, according to research for World Travel Market London – the leading global event for the travel industry – released today (Tuesday 7 November) at WTM London.

The Top 100 City Destination Ranking WTM London Edition, by Euromonitor International, states that London is a globally recognised leisure and business hub, with the city creating more than USD550 billion in value added during 2016. However, the city’s attractiveness for business services is under pressure post-Brexit.

“Brexit threatens to undermine London’s dominant position for ease of doing business and its attractiveness as a start-up hub. Competing cities that have emerged to steal its crown include Paris, Frankfurt, Berlin, Stockholm, Dublin and Amsterdam, based on transport connections, diversity and creative spirit,” says the report.

Generally, 20% of inbound arrivals to London and over 30% of spending in the city is business-related. Business travellers spend twice the amount their leisure counterparts do.

London Mayor Sadiq Khan launched a major campaign, #LondonIsOpen, to show the city is united, welcoming and open for business to the world following the EU referendum.

The campaign, the report states, is ‘critical to ensuring the message is heard loud and clear so that business continues’.

The warnings highlighted in the Euromonitor report are shared by other players in the travel industry, including campaign group A Fair Tax on Flying, which has been calling on

the Government to make a ‘decisive cut’ in Air Passenger Duty to open up new routes to emerging markets after Brexit.

A Fair Tax on Flying says that, compared to the EU average rate of APD, business travellers flying from the UK are being hit by an additional £400m in tax each year.

Campaign spokesperson Karen Dee said: “It puts the UK economy at a severe competitive disadvantage in the very markets we need to trade with post Brexit when compared to our European neighbours.

“If the Chancellor wants to signal that Britain is truly ‘open for business’ as Brexit looms, what better way than cutting this tax on trade by at least 50% to bring us in line with the next highest of our European trading rivals, Germany.

“We need a decisive cut in APD to open up new routes to emerging markets and make it easier to build up trade and to make the UK an even more welcoming destination for foreign business travellers, many of whom invest here.”

With the UK government triggering Article 50 in March 2017, the country will need to leave the EU by March 2019 in line with regulations.

The extent of Brexit on business travel to London depends on the final deal.

Euromonitor warns that, even if a free trade agreement is reached, there will be other regulatory and non-tariff trade barriers, as well as the loss of EU passporting rights for the financial sector.

The ‘light Brexit’ scenario would see the UK government relaxing its negotiating position over immigration in return for access to the single market and passporting rights to preserve London’s financial sector.

“Under this scenario, UK GDP would grow, positively affecting outbound travel, but dampening growth in inbound arrivals,” says the report.

A worst-case scenario would see the UK leaving the EU without having reached a new free trade agreement, with trade relations defaulting to WTO conditions.

“This scenario would lead to a long-term decline in UK GDP growth. The impact on departures would be negative, but arrivals would grow,” says the report.

World Travel Market London, Senior Director, Simon Press, said: “No-one knows the outcome of the Brexit negotiations and what effect leaving the EU will have on London, although, as this fascinating report shows, there will likely be challenges ahead for the city in terms of attracting business travel.

“But London has been a major trading city for centuries, and has adapted to change with the times on numerous occasions and will no doubt do so again after Brexit.”

eTN is a media partner for WTM.