Updated November 1st 2019
Unless you’ve been off grid for a couple of years or spending Seven years in Tibet, chances are you know at least this much about Brexit – the UK is leaving the European Union. When is still anybody’s guess as the UK has already missed their original deadline of 29th of March this year, as well as their extended exit date of October 31st of October. The new Brexit deadline is pencilled in for January 31, 2020. Prior to that, the UK will be heading to the polls on December 12 to hopefully make the whole process a bit easier.
If you feel like you need a Brexit refresher at this stage that’s totally ok. Just head on over to our Brexit info page for a quick refresher with a handy glossary to make sense of all the gobbledygook coming out of the UK at the moment and pop back over.
Ok. So we know what Brexit is and within reason what it means for our friends in Britain, but how does it affect me as an Aussie traveller heading to the UK and Europe? That’s a tricky question to answer because Brexit and its flow on effects are connected to so many parts of our day to day and travelling lives, but we’ll do our best.
Deal or No-Deal; that is the question
Brexit is happening (unless there is a last ditch referendum, which is highly unlikely with Boris Johnson PM) and it’s already brought down two Prime Ministers (anyone remember David Cameron?) but the one thing that most parliamentarians, contrarians, economists and businesses want to avoid like the plague is the dreaded No-Deal Brexit scenario.
What’s so scary about leaving the EU without a workable divorce settlement? Plenty.
First of all, a Brexit deal is designed to allow the EU and Britain to part ways with stable agreements in place to continue to have a solid working and trading relationship. Britain isn’t moving to another part of the world after the split, so the UK and EU will still be required to put their differences aside and work together. A Brexit deal encompasses things like trade tariffs, border movements and business taxes – all things that are instrumental in running a country.
The UK encompasses Scotland and The Republic of Ireland and Northern Island, regions that haven’t been united in nearly 100 years. The current border situation in Ireland has been working well since Ireland joined the EU and renegotiation of a border plan is a huge sticking point for Brexit negotiators. There are also hundreds of thousands of workers currently working between the EU and UK who will find themselves in a spot of bother if no deal can be reached to ensure continuity of work and travel.
Basically, there could be a big difference between what Brexit actually looks like depending on a Deal or No-Deal scenario. The New Prime Minister, Boris Johnson has vowed to leave the EU on Halloween ‘come what may’ which has resulted in more than a few jitters across the UK, EU and indeed the world. These concerns are slowly being squashed though, as the premise of another extension and a law that rules out a no-deal currently are currently at play.
Effect on the AUD
Just before Brexit went to a referendum in 2016, $2000AUD would have bought you pretty well smack on £1000GBP (yuck) whereas today you are looking at over £1100GBP for your hard earned AUD.
Since the 2016 referendum the buzzword for AUD/GBP foreign exchange has been – UNCERTAINTY. The Pound has found itself fluctuating every time a new deal was taken to parliament to vote on and was pounded every time something went awry with Brexit negotiations or business confidence dropped.
This uncertainty has led to many businesses heading back to the EU or simply moving their base of operations from the UK. With less confidence in the GDP resulting in less demand for the Pound, the currency is likely to face downward pressure on it until everything is resolved 100%.
While the AUD may be nearly 10% higher today against the GBP than it was before the referendum (curse you Britain for having such a strong currency) it has been under its own pressure due to the US/China trade war and domestic economic performance.
Will Brexit affect trade?
The UK is Australia's ninth largest export market, responsible for over $11 billion in trade last year but making up just three percent of the total, well behind our largest trading partners China (30%), Japan (12%) and Korea (6%). With China and the US embroiled in an ongoing trade war, this has been bad news for Aussie exports and the AUD as our economy is linked very closely to the fortunes of China and how much their country consumes in goods.
On the flipside, The EU accounted for nearly $30 billion worth of exports during the same time, making up nearly 8% of our total exports in 2017, making it our third-biggest export market. The EU also pumped out over $71 billion in imports to Australia, or nearly 20% of our total, making it our biggest import source.
This means Australia has to keep both the EU and UK on side when it comes to trade, we don’t want to be the naughty kid that plays off against both parents and ends up being punished by both.
Long term it makes sense for Australia to be closely aligned with EU for trade, but in the wake of Brexit it might be a good time to get some more favourable arrangements from our oldest and dearest friend, the UK. Australian businesses, economists and politicians have already been holding their breath every time Trump tweets about China or the trade war, we can’t afford another area of uncertainty.
Why should this be important to Aussie travellers? Well, Australia’s trade balance and partnerships have a direct influence on the value of the Aussie dollar. Less demand for our exports due to tariffs means less demand for the AUD. Lower demand for our currency can diminish its value.
What are the consequences for Australia – Britain tourism?
It’s not like Brexit has resulted in a turning of the travel world upside down for Aussie travellers so some of the effects will be hardly noticeable.
First and foremost for Aussies travelling to the UK is that fact that our AUD is higher than before Brexit was announced (YAY). For Aussies travelling to Europe there is no change at all, Brexit won't directly affect your ability to work or travel within the EU - that's still covered by the Schengen system, which gives Australians a 90-day travel visa.
What Brexit could mean for Aussies in the not too distant future is that the UK will be keen to negotiate new trade and visa deals with their closest mates. This could mean Aussies looking to live or work in the UK for extended periods of time get longer or more privileged treatment as the UK looks to recoup workers and people following the inevitable outflow of European citizens leading up to and just after Brexit. Here’s hoping!
For Brits travelling to Australia it means that the shoe will be on the other foot and their currency conversions may not look as rosy as they did in 2015. It’s possible this could lead to a decrease in inbound tourism from the UK and similar to trade, fewer people visiting Australia means less demand for the AUD, so it could affect your travel money moving forward. This is a very long term outlook though and is more likely to affect local tourism operators than you.
Final tips for Aussies travelling to the UK or Europe
No country has ever left the EU before and as much as we know about travel and currencies, nobody can predict what’s going to happen next when it comes to Brexit. Every time you think you’ve got a handle on the situation along comes a spanner.
That being said, there are some tried and true steps you can follow as a smart traveller to give your back pocket the best possible shot at being full before your trip to the UK and to avoid any speed bumps.
- Sign up for Rate Alerts for the pound and euro. That way you’ll be the first to know if the AUD is performing well.
- Educate yourself on what else impacts these currencies so you can make an informed decision of when to purchase.
- Be conscious of currency fluctuations when purchasing flights, accommodation and day tours. If the AUD is performing well against the pound, it will make your purchase cheaper. Taking advantage of a better exchange rate and purchasing things like tours and transport before you leave may also make your holiday cheaper, especially if the pound regains value whilst you were overseas.
- If the pound continues to weaken, it’s worth taking advantage of an opportunity to splurge on things you otherwise wouldn't have been able to afford.
- Keep an eye on currency markets, especially around the key dates mentioned at the start of this article. Big announcements and the uncertainty that surrounds them will often trigger changes in the market.
- Safeguard your foreign currency and add Rate Move Guarantee to your purchase in store. It’s free, and if the rate improves within 14 days we will refund the difference*.
The main thing is to stay as up to date as you possibly can from a number of different sources relating to Brexit. We’re really getting down to the business end and fluctuations in the AUD, GBP and EUR are likely to be more pronounced during this time.
Nobody has all the answers when it comes to currency forecasting and anyone that says they do should be able to give you that week’s Gold Lotto numbers as well. Watch the news, follow Donald Trump’s tweets, the Reserve Bank of Australia, the Bank of England and keep up to date with our AUD updates and you might just save yourself enough dollars for some extra fun on your trip!
This blog is provided for information only and does not take into consideration your objectives, financial situation or needs. You should consider whether the information and suggestions contained in any blog entry are appropriate for you, having regard to your own objectives, financial situation and needs. While we take reasonable care in providing the blog, we give no warranties or representations that it is complete or accurate, or is appropriate for you. We are not liable for any loss caused, whether due to negligence or otherwise, arising from use of, or reliance on, the information and/or suggestions contained in this blog.
*Terms and conditions apply to Rate Move Guarantee. See https://www.travelmoneyoz.com/rate-move-guarantee for more information