Tourism and business nervous over impact of UK vote to leave Europe
There are mounting concerns in Barbados over the possible impact of Britain’s decision to leave the European Union (EU), with tourism and business officials nervous the country could suffer extensive collateral damage.
Newly elected Chairman of the Barbados Hotel and Tourism Association (BHTA) Roseanne Myers tonight described the vote as “extremely disturbing”, while a leading economist expects Barbados’ foreign exchange reserves to take a solid hit.
The UK is Barbados’ number one source market and local tourism officials are deeply worried that the victory in yesterday’s referendum by those who promoted an exit, or Brexit, would rock the island’s bread and butter industry.
In a statement to the media this evening Myers advised members not to panic, but it was clear she was worried.
“The association has been cautiously monitoring the lead-up to the Brexit vote but the initial shockwave after a decisive win by the ‘Leave’ campaign is extremely disturbing as it has resulted in plunging currency value and stock market prices. Weak currency and reduced spending power coupled with the uncertainty further fuelled by the Prime Minister’s resignation, are concerning,” Myers said.
The new BHTA head said members had been asked to monitor their bookings and report any negative impacts, including cancellations or a slowdown in the number of bookings.
However, she cautioned members and tourism partners against knee-jerk reactions that could cause even further damage.
“Any partners, investors or potential investors should be similarly cautioned. The process for the transition to commence involves an application for exit from the EU and, therefore, we must not hasten the possible fallout by making rash decisions,” she urged.
Still, the BHTA and its members were discussing the possible impact and planning strategies to cope with any fallout even “as we watch the unfolding saga”.
“It is indeed the greatest shock to the United Kingdom market in recent history and we have to be well prepared for what it may bring,” she stressed.
President of the Barbados Economic Society (BES) Jeremy Stephen also anticipates some fallout, although he does not expect an immediate drop in arrivals from Britain.
Stephen told Barbados TODAY visitors to high-end destinations such as Barbados would likely book their holidays well in advance. However, he said because of the drop in the value of the sterling, they would likely have less to spend when they arrive here, leading to a dent in the island’s foreign reserves.
“What this means is that the average tourist that comes to Barbados, say the latter half of the year, will have to spend much more, at least ten per cent more, just to enjoy the same level of goods and services that they afforded from yesterday really,” Stephen explained .
“So with that being said, that, coupled with the anticipated slight rise in the price of oil and increase in interest rates, the latter half of 2016 doesn’t bode well for our economy in terms of the foreign reserves.”
However, the economist sees opportunities from the Brexit for Barbados and the rest of the region.
He explained that given the slide in the currency valuation it was likely that Britons would seek to take their investment, particularly in real estate, to other countries, and the Caribbean should capitalize on this.
“When currencies lose value, especially as much value as the pound [sterling] did last night or going into this morning, one would see that as a sign of capital flight.
“Our real estate market may very well benefit . . . . Many wealthy British investors may very well wish to stay in other currencies or even commodities, which in the short term right now are really benefiting from the flight form the British pound,” Stephen explained.
“So I guess the guys on the west coast should be rejoicing at the thought of a Brexit and at least over the next two years. The flight of capital to hard commodities and real estate might very well benefit the Caribbean region especially in the area of real estate and the need for financial services as provided by our international business sectors.”
Meanwhile, Second Vice President of the Barbados International Business Association (BIBA) Julia Taggart told Barbados TODAY while it was difficult to say what the impact was likely to be on that industry, she was sure it would cause a level of uncertainty as it related to trade and investment activities between Barbados and the northwestern European nation.
This, Taggart explained, was as a result of the plunge in valuation of the sterling against the US dollar.
“The direct hit will be felt if the pound drops significantly as businesses will be jittery, and investment opportunities will be side-lined waiting for recovery,” she predicted.
Taggart further pointed out that the length of time it takes for the UK to actually leave the EU could add to the uncertainty.
“The EU is far from perfect, but without firm solutions for a healthy and robust exit we could be facing uncertainty in the markets for some time, which will have an impact on not only Barbados’s international business but all forms of trade and investment. The other concern is that any new trade deals or treaty enhancements with the UK will be delayed as the UK fights for its position on the world stage,” Taggart said.