Brexit and travel retail

15 June, 2016

It’s the elephant in the room topic for travel retail.

Scan the trade press and programmes of upcoming industry conferences and you’ll find mention aplenty of hot topics such as China’s anti-corruption crusade, the collapse of the Russian rouble and combatting the challenge of internet shopping. Yet there is virtually nothing on the prospect of Britain leaving the European Union. It’s a decision which might have huge implications for the entire European travel retail market.

I find the radio silence a bit baffling. This momentous vote is going to be a lot closer than many political pundits had originally predicted. In early May the referendum’s Leave campaign was polling at 43% v 46% for Remain with a key 11% of voters yet to decide. Despite the massed intervention of multinational companies, financial institutions and political big-hitters (not least outgoing US president Barack Obama) on behalf of Remain, the outcome of this month’s vote is still far from a done deal.

So let’s take a leap into the unknown. What would Brexit mean for the travel retail liquor business? It’s a head-scratcher and the trouble is that the likely pros and cons are fiendishly hard to predict.

In search of answers I decided to call up Keith Spinks, secretary general of industry trade body the European Travel Retail Council – he’s usually the man in the know when it comes to such complicated regulatory matters. He could see no reason why, in the fullness of the time, the UK could not apply for ‘third country’ status, as already enjoyed by other non-EU European countries such as Switzerland and Norway.

The UK is already the world’s fourth largest duty free market, generating annual sales of some £2.6bn. So the resumption of intra-EU duty free sales at UK airports and onboard ferries some 17 years after they were axed would be a huge shot in the arm. The benefit of the UK’s shiny new duty free status would not just apply to airport and ferry operators in Britain. EU travel retailers would also profit, being able to sell duty free goods to UK-bound passengers.

Would we see a resumption of the cross-Channel booze cruise trade that became such a cultural institution in the 1970s and ’80s? Certainly, I can see the likes of Eurotunnel and P&O Ferries jumping at the chance of selling more profitable duty free wines, spirits and tobacco. Eurotunnel CEO Jacques Gounon has already said as much. “It would be an incredible boost for our business,” he told the FT last November. “If I can dream for a moment, the best thing which could happen for Eurotunnel from Brexit is that duty free is re-setup.”

Yet it wouldn’t all be good news. Brexit would likely mean ferry passengers would no longer be able to bring back large quantities of duty-paid goods from France, just smaller personal allowances of 1l of spirits, 4l of wine and 16l of beer.

One also has to question whether, in these more security and health-conscious times, the day tripper-led booze cruise trade would be allowed to operate in such an unfettered manner as it did in its heyday. Returning to a more price-driven model of duty free shopping would also reverse the direction the industry has taken since the millennium with its emphases on luxury and exclusivity, as well as value for money. Do we really want to return to the stack-it-high sell-it-cheap ethos of yesteryear?

In all the uncertainty one thing is clear. As Spinks explained, if Britain does decide on Brexit the return of duty free won’t happen overnight. In fact, with a mountain of more important issues to sort out, its return could take years to implement. Nonetheless, I for one will be watching the outcome of this month’s vote with particular interest.





Comment

Dominic Roskrow

The serious business of bourbon

This is most odd. I’m standing with two American gentlemen in the corner of a very swish steak bar staring at a surreal painting of what we’re being told is a ship exploding as it sails towards a lighthouse. I think.

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