By Sir Ronald Sanders
(The writer is Ambassador of Antigua and Barbuda to the United States and the Organisation of American States. He is also a Senior Fellow at the Institute of Commonwealth Studies at the University of London and at Massey College in the University of Toronto. The views expressed are entirely his own)
Caribbean persons interacting with British tourists, apart from the super-rich, should be mindful that if these visitors appear reluctant to part with their money, or demand better value, it’s because they’re spending a much-devalued UK currency.
In the first week since Boris Johnson took the reins of the British government on July 24, the pound dropped 1.3% against the US dollar, bringing its value to US$1.22. In July alone, the sterling lost 4.3% of its worth, making it the worst performing major currency in the world.
Fortunately for Caribbean countries whose tourism industry is reliant on British visitors, holidays for this summer and the winter of 2019-2020 have already been booked and paid. Therefore, there is unlikely to be a major decline in numbers for these periods.
However, there will be an immediate drop in the amount of money that is spent. Traditionally, UK and European visitors spend a longer time on vacation and spend more than tourists from the US and Canada. But, with the value of their money reduced, British visitors will spend less this summer and next winter. This will have an impact on all Caribbean countries, particularly those that have a great dependence on UK holidaymakers.
This situation is a direct result of the uncertainty that surrounds Britain and the other 27 nations of the European Union (EU) reaching a mutually satisfactory deal on BREXIT – the UK’s divorce from the EU – by the deadline of October 31. The prospect of such a deal has grown more remote since Mr. Johnson became Prime Minister. He has made it clear that he expects the EU negotiators to compromise. If they don’t, he will take Britain out of the EU with no deal on cross-border access for goods, services and people and no settled arrangements for how Britain will meet costs arising from treaty obligations. The latter costs have been estimated at £39 billion.
However, the EU negotiators have shown no sign of relenting from the deal they settled with Johnson’s predecessor, Theresa May, that the UK parliament rejected for varying reasons, including a “back stop” on the border between Ireland (a EU member) and Northern Ireland (part of the UK). The back stop is meant to make sure that the Irish border remains open whatever the outcome of the negotiations between the UK and the EU over their future relationship. The hard line Brexiteers, including Johnson, want the back stop scrapped for fear that it could become legally permanent.
Representatives of several sectors of the UK economy have expressed alarm at the prospect of no deal with the EU. The Confederation of British Industry (CBI) has warned that neither the UK nor the EU is ready for a no-deal BREXIT on 31 October. “Although businesses have already spent billions on contingency planning for no deal, they remain hampered by unclear advice, timelines, cost and complexity,” the CBI says.
Without a deal, Britain would have to trade with the EU on World Trade Organisation terms, making its exports and imports more costly. The UK would render itself distinctively uncompetitive with the EU and others, including the US and China that are concluding trade deals with other nations.
This nervousness over no deal has shown itself in the currency markets in Britain. The pound has plunged to its lowest value since the 1980s. British middle-class consumers are certainly concerned about the increase in costs of holidays, but, more broadly, the entire population is troubled by the increase in their cost of living. The costs of imported goods will rise, as will the price of British manufactured goods and agricultural production that are reliant on imported inputs.
Of course, the British tourist industry should benefit. The greater value of every major currency against the pound would make it cheaper for persons worldwide to visit Britain. But increased tourism earnings might not be enough to compensate for higher costs generally, including for hotels and restaurants. After all, travel and tourism contribute only 11 % of Britain’s Gross Domestic Product (GDP).
Tourism planners in several Caribbean countries have been aware of the adverse impact of a looming and actual BREXIT. In Antigua and Barbuda, for instance, while the numbers of UK visitors increased in 2018 over 2017, the percentage of total tourists declined from 28.59% to 26.52%. This BREXIT-induced decline has led Caribbean countries to increase their marketing efforts in other countries, particularly the US.
The Antigua and Barbuda Tourism Minister, Charles Fernandez has initiated a strategy with the hotels on the island to settle arrangements with US carriers and tour operators to boost the numbers of US visitors to compensate for any further decline in UK tourists arising from a “no deal” BREXIT.
A more intensive approach to getting tourists from other markets is also required by those Caribbean countries where UK tourists comprise the largest single number of visitors. But, since almost all their economies have a high reliance on tourism, they should also maintain an active marketing presence in the UK which, even after BREXIT, will still be among the top 10 economies in the world.
The World Data Atlas shows eight Caribbean Community (CARICOM) countries among the fifteen countries in the world whose GDP are significantly reliant on travel and tourism receipts. St Kitts-Nevis tops the list at number 4 in the world, followed by Grenada (5), St Vincent and the Grenadines (8), Antigua and Barbuda (10), St Lucia (11), Bahamas (12), Barbados (14) and Jamaica (15).
Given this reality, however smaller the number of UK tourists might become over the next few years as Britain comes to grips with being outside the EU with or without a deal, Caribbean countries should strive, in their own interest, to retain a share of it.
In the short-term, Caribbean governments and hoteliers should create a plan to keep the region attractive to UK visitors, including ways in which they can incentivise their visits.
The longer-term solution rests with the UK government and parliament, both of which should recognise that, stripped of all emotional considerations, the British economy cannot recover and prosper in splendid isolation from its closest neighbours and, presently, its biggest trading partner – the EU. Britain can retain sovereignty over its affairs but settling the EU relationship on predictable terms is crucial to progressing anything else.