The Eurozone’s population and institutions may have been surprised by the outcome of the June Brexit referendum, but the economy has barely missed a beat as markets have snapped back after an initial slide, according to the GBTA BTI™ Outlook – Western Europe report, conducted by the GBTA Foundation, the education and research arm of the Global Business Travel Association (GBTA). Consumers are consuming and businesses are hiring, investing and traveling for now. While spending has been somewhat resilient, measures of near-term investment intensions plunged in the third quarter of this year, suggesting coming weakness.
Brexit’s potential for delaying short-term economic decisions and its long term impact on trade, jobs, immigration and investment will create challenges for business travel across Europe in the years to come. The specific effects on business travel that GBTA foresees include:
- Uncertainty: New waves of uncertainty may develop following the actual delivery of Article 50 as trade and immigration negotiations begin in earnest.
- Travel Pricing: The end of open skies for European air carriers may result in fewer flights and higher fares and reinstituting mobile roaming charges could expose road warriors to rising voice and data communication costs.
- Travel Friction: The debate over immigration could lead to extreme new UK visa requirements, which would likely be reciprocated across the EU. Coupled with rising security concerns in a new separated world, business travelers may face more difficulty and scrutiny moving throughout the EU.
- Access: The free movement of people and money throughout the EU brought many advantages for business travel. Going forward airlines may have to renegotiate routes and gates with both the UK and the EU potentially resulting in fewer flights and higher fares, processing and acceptance of credit cards becomes more complicated and the end of the European Health Insurance Card for UK business travelers could muddle health coverage during trips.
- Location Decisions: Establishing restrictions on the right for EU citizens to work in any member state will have profound longer-term impacts on business travel levels and patterns.
The GBTA BTI™ Outlook – Western Europe report looks at the five largest business travel markets in Europe: Germany, the United Kingdom, France, Italy and Spain that together make up 70 percent of Western Europe’s business travel market, and serve as a strong indicator for the European business travel market more broadly. Western Europe’s business travel spending is projected to increase to $210.7 billion USD in 2016 and top out at $220.6 billion USD in 2017, 6.0% and 4.7% growth respectively – very positive numbers, but slightly lower than predictions in GBTA’s previous forecast.
“While trips and spending have been bounded by slower European and global economic growth, Brexit’s influence has been negligible thus far,” said Catherine McGavock, GBTA’s Regional Vice President – EMEA. “Businesses and business travelers continue to show their resilience and ability to adapt as Europe has faced an array of challenges recently, but business travel remains strong.”
Germany’s economy remains one of the strongest in all of Western Europe fueled by a robust labor market, low interest rates, rock-bottom energy prices and strong demand for exports. GBTA projects Germany to continue to lead the growth in business travel spending from 2015-2017, with a 7.5 percent compound annual growth rate increase, followed by Spain (6.5 percent), the United Kingdom (4.7 percent), France (4.2 percent) and Italy (2.6 percent).
Country-Level Business Travel Outlooks
Germany – German organizations continue to send more business travelers on the road as it continues to be the strongest business travel market in the region.
- Total business travel spending will increase 7.4 percent in 2016 and another 7.6 percent in 2017 reaching $73.4 billion USD.
- Domestic business travel will advance 7.4 percent this year followed by 7.8 percent in 2017 reaching $59.7 billion USD.
- International business travel will grow 7.3 percent this year and 6.8 percent next year hitting $13.8 billion USD.
The United Kingdom – Despite the uncertainties surrounding Brexit, the UK’s economy and business travel market have not imploded as many critics feared. Next year will present more of a challenge from the UK’s business travel market though as the downside risk becomes more palpable with many firms likely to postpone or reduce investment, which could lead to a slowing economy.
- Total business travel spending will increase 6.9 percent in 2016 and another 2.4 percent in 2017 reaching $51.6 billion USD.
- Domestic business travel will advance 5.9 percent this year followed by 2.5 percent in 2017 reaching $33.5 billion USD.
- International business travel will grow 8.9 percent this year and 2.3 percent next year hitting $18.2 billion USD.
France – While French business travel has not been quite as challenged as travel in its Southern Tier neighbors over the past few years, growth has been much less robust than healthier European markets.
- Total business travel spending will increase 4.1 percent in 2016 and another 4.2 percent in 2017 reaching $40.2 billion USD.
- Domestic business travel will advance 3.3 percent this year followed by 4.8 percent in 2017 reaching $25.9 billion USD.
- International business travel will grow 5.4 percent this year and 3.1 percent next year hitting $14.4 billion USD.
Spain – Just a couple years ago, Spain’s business travel market was one of the most troubled markets on the European continent, but is now expected to experience one of the highest growth rates over the forecast period, second only to Germany.
- Total business travel spending will increase 7.2 percent in 2016 and another 5.8 percent in 2017 reaching $22.0 billion USD.
- Domestic business travel will advance 8.0 percent this year followed by 5.7 percent in 2017 reaching $17.4 billion USD.
- International business travel will grow 4.0 percent this year and 6.3 percent next year hitting $4.5 billion USD.
Italy – Ongoing political turmoil, obstinate banking tensions and Italy’s sizeable debt will likely continue to hinder investment prospects and create a ceiling for business travel performance.
- Total business travel spending will increase 3.4 percent in 2016 and another 1.9 percent in 2017 reaching $33.3 billion USD.
- Domestic business travel will advance 3.0 percent this year followed by 1.8 percent in 2017 reaching $29.2 billion USD.
- International business travel will grow 6.4 percent this year and 2.7 percent next year hitting $4.1 billion USD.
The GBTA BTI™ Outlook – Western Europe 2016 H2 report is available exclusively to GBTA members by clicking here and non-members may purchase the report through the GBTA Foundation by emailing [email protected].