Johnson’s backstop stance sends the pound crashing and holiday costs soaring - People's Vote

Johnson’s backstop stance sends the pound crashing and holiday costs soaring

The value of the pound has plunged this morning on the back of Boris Johnson’s hardening of his support for No Deal – meaning it is inevitable that the cost of everything from petrol at the pumps to two weeks holiday in Spain will rise. 

In a move designed to strengthen his appeal to the 160,000 Conservative members – 0.25% of the population – the only people who have a say on what Brexit policy the next Prime Minister pursues, Johnson last night ruled out accepting even a reformed or time-limited Irish border backstop as part of any Brexit deal. With the backstop regarded as essential to preserve an open border in Ireland by the EU, Johnson’s words – if said in sincerity – point squarely towards a No Deal crash out of the EU.

In those circumstances British trade would inevitably be hit hard and with less demand to pay British exporters, the external value of the pound will fall. Today’s slump on the exchanges is merely the markets pricing in that downturn in advance.

And the fall today comes after three months in which the pound has taken a battering, even before we take into account commission and other mark-ups:

  • Euro: in April one pound on the exchanges bought €1.16, today it buys just €1.11
  • US Dollar: in April one pound bought $1.31, today it buys $1.25
  • Aus Dollar: in April one pound bought $1.82, today it buys $1.77
  • Thai Baht: in April one pound bought ฿41.60, today it buys ฿38.48

And, just days before the school holidays begin in England, new analysis from the People’s Vote campaign reveals that the average cost of holidays to Brits’ favourite EU destinations would soar by up to £225 in the event of a destructive No Deal.

And a hard Brexit could add even more costs to a European holiday with a quadruple whammy of rising costs for flights, hotels, insurance and mobile roaming fees. In the event of a destructive No Deal the pound could fall to parity with the Euro or even – as predicted last week by Sir Richard Branson – to parity with the US dollar, sending the price of holidays worldwide soaring.

The British Travel Association estimates that flights are currently 40 percent cheaper as a result of our membership of the European Single Market, while experts say the pound would fall to the same value as the Euro in the event of No Deal, driving up the cost of hotels.

A hard Brexit could also see Brits lose their entitlement to free health care across the EU, and the return of roaming charges for mobile phone use abroad.

Soaring hotel costs would see a holiday for two to Ibiza soar by £464, while rising air fares would help push up the cost of a couple’s trip to Majorca by £292.

Tens of millions of British tourists fly to these destinations every year and will be disappointed to be hit in the pocket on future trips because of a disorderly and chaotic Brexit.

 

Commenting, Wes Streeting MP, leading supporter of the People’s Vote campaign, said:

“Boris Johnson and Jeremy Hunt want to impose a hard Brexit, or even a destructive No Deal on us, without giving us the final say. That won’t just threaten jobs in the car industry, steel or financial services, it will hit ordinary families hard by trashing the value of the pound and sending the price of everything from petrol at the pumps to two weeks at Disneyland soaring.

“It is not democratic, not fair and not legitimate for this decision to be only in the hands of the 0.25% of the population who are members of the Conservative Party. With so much at stake for all of us, then the decision must be in the hands of the people with a final say referendum.

“This Brexit crisis has come down to a simple question about whether we live in a democracy: no one has the right to force a destructive No Deal on the country without all of us having our voice heard in a People’s Vote.”

/ends

 

Notes to editors

  • According to TripAdvisor, the ten most popular holiday destinations for Brits in 2016 were Majorca, Tenerife, Ibiza, Crete, Lanzarote, New York City, Benidorm, Albufeira, Corfu, and Gran Canaria (Business Insider, 12 May 2016, link).
  • The following table estimates holiday costs for two people now and after No Deal for those ten most popular holiday destinations.

Destination

Flight

Hotel

Health insurance

Mobile roaming

 

Now

Post-Brexit

Now

Post-Brexit

Now

Post-Brexit

Now

Post-Brexit

Majorca

£186

£260

£1,351

£1,495.56

Free

£12

Free

£61

Tenerife

£534

£748

£378

£418.45

Free

£12

Free

£61

Ibiza

£246

£344

£2,730

£3,022.11

Free

£12

Free

£61

Crete

£626

£876

£3,521

£3,897.75

Free

£12

Free

£61

Lanzarote

£436

£610

£2,107

£2,332.45

Free

£12

Free

£61

New York City

£1,094

£1,532

£658

£733.67

No change

No change

NA

NA

Benidorm

£286

£400

£609

£674.16

Free

£12

Free

£61

Albufeira

£246

£344

£1,631

£1,805.52

Free

£12

Free

£61

Corfu

£324

£454

£1,148

£1,270.84

Free

£12

Free

£61

Gran Canaria

£586

£820

£3,941

£4,362.69

Free

£12

Free

£61

AVERAGE

£456

£639

£1,807

£2,001

Free

£12

Free

£61

Sources: See methodology below

  • This shows that the average price increase across these destinations is £225 per person.
  • According to statistics published by the Civil Aviation Authority, there are almost 35 million flights to these holiday destinations each year, with the breakdown by destination below. This shows that the number of people affected by these changes and increases will be substantial.

Destination

Flights from UK per year

Majorca (Mallorca)

5,376,234

Tenerife

4,359,243

Ibiza

1,937,458

Crete

1,232,185

Lanzarote (Arrecife)

2,752,467

New York City

5,570,717

Benidorm (Alicante)

5,567,154

Albufeira (Faro)

4,086,704

Corfu

1,067,857

Gran Canaria (Las Palmas)

1,735,347

TOTAL

33,685,366

Source: CAA, Airport Data 2018, Table 12.1, https://www.caa.co.uk/Data-and-analysis/UK-aviation-market/Airports/Datasets/UK-Airport-data/Airport-data-2018/

Methodology

Nb Due to its location outside the European Union, New York City as a destination has been excluded from all parts of this analysis except hotel prices, which would still be affected as a consequence of Sterling’s value dropping against the Dollar.

 

Flight prices

According to the British Travel Association, air fares are 40% lower than they would be if Britain would not benefit from membership of the single market, which has driven prices down year on year (ABTA, 2017, link).

This trend would be reversed after Brexit, and an increase in flight prices has been calculated accordingly, using the cheapest non-stop fare to each destination for a Friday-Friday trip during the month of August.

 

Hotel prices

Roger Hallam, currency chief investment officer at JPMorgan Asset Management, predicted that the pound would fall to one-to-one with the euro and 1.15 against the dollar (The Independent, 16 October 2017, link). This equates to a 10.7% price increase for hotels paid in Euros, and an 11.5% price increase for hotels paid in Dollar

The average hotel price was calculated by taking the average price of the top 4 recommendations on Google Hotel Search for a 7-night stay for two people in each location. The price increase was then applied to that average price.

 

Insurance prices

For holidays in the EU, Brits currently do not need any additional insurance because they are covered by the European Health Insurance Card (EHIC), which gives them equal and free access to emergency care in any EU member state while they are there. According to the Department of Health, in 2016 there were 27,570,911 EHIC cards in circulation in the UK.

In case of a hard Brexit, this cover will come to an end and Brits will have to buy travel insurance in the same way they need to for non-EU destinations. This analysis uses the conservative estimate of every holidaying Brit opting for the cheapest travel insurance for Europe-wide coverage that is currently available (at £12), as highlighted by MoneySavingExpert (MSE, accessed 8 July 2019, link).

 

Roaming charges

Since June 2017, there are no more roaming charges for mobile usage by Brits when on holiday in other EU countries. Prior to this victory for consumers  in the EU, uSwitch conducted a survey that showed that Brits overpay on roaming charges by an average of £61 per trip (uSwitch, May 2015, link). This figure was used in this analysis.