Challenges and Opportunities of Brexit for UK Aviation Industry and Growth Slowdown Faced by UK

Governance of European
Union

TASK 2
The below presented is the evaluation done of the challenges and opportunities in the
concept of BREXIT:-
 Challenges
Post BREXIT- Issues faced by UK aviation industry: A set of very serious challenges
have been faced by the airlines sector in Britain, although the long-term outlook might not be as
gloomy as some fear. In June 2016 the stocks of the aviation industry tumbled down as the
Britain voted in favour of leaving the EU, and also the shares of International Airlines Group
(IAG), which is the parent corporation of British Airways plunged by approximately 30% in the
first three training days following the vote. Some of the other airlines industries also suffered a
similar rate of decline such as Budget airlines, easy jet and Ryanair, while Lufthansa were worth
17% less at the end of the month as compared to the EU was elected. In whole the the influence
of BREXIT on the airlines industry is uncertain (Benington and Geddes, 2013). For instance
potential European economic slowdown, negotiations over Brexit and the future regulatory
landscape for aviation are the issues in short-run. IAG expected that UK's vote in favour to leave
the EU will not cause any sought of long-term materialistic influences on the business, although
it experienced a weaker than expected trading environment in the run-up to the vote.
The airlines industry's main trade group is International Air Transport Association
(IATA) estimated that British-air passengers count will fall approximately up-to 3.5% for the
upcoming four years. Post July IATA reported that growth in passengers traffic has already
declined in May as compared of early 2016 and further the Brexit vote will complicate the things
more. Airlines sector plays a significant role in supporting the development and growth. The post
Brexit frame work is negotiated between UK and EU and there are no steps backward of
connecting the aviation sector (Richardson and Mazey, 2015). A fully liberalised and deregulated
airlines market within the UK and Europe, which determined that all the European and British
airlines can continue to operate their business as they are presently doing, and this is to be
considered as one of the crucial points in UK authorities which will have to be negotiated with
their European correlatives. The influences of Brexit would be virtually neutralised and Britain
will regain the access to European Common Aviation Area, which restricts the access to airlines
over the EU airports in the same way the passport banking system allows banks in EU economies
to operate across the association. However, Britain will fail to remain within the single market, it

could be forced to settle for a co-operation agreement or a traditional bilateral treaty which is an
air transport agreement with the EU which will provide the UK more control in terms of policy
but could also see its market access restricted and, crucially, could make flying between the UK
and Europe a lot more expensive (Vogel, 2006).
On the basis of the results and the outcomes of the negotiations, it is likely that loss of
operational flexibility and of higher costs which will be faced by the pan-European carriers
which is likely to lead to higher airfares and potentially fewer flights. Brexit could still have its
silver lining, for while the Britons travelling abroad will be less for a week and which will bring
more foreign visitors to the UK. London is among Europe's most popular destinations, and
travelling to the UK from the US is 10% cheaper than it was a month ago. A need for
renegotiating the airlines agreement will be there fo0r the UK with many other countries
including the US There may also be a need for the UK to renegotiate airlines agreements with
many other countries including the US and Canada, which are currently covered by EU-level
agreements, PWC director Gwyneth McLeod told IB Times UK (Jeffery, 2015).
Growth slowdown faced by UK :
 For the growth slowdown in the upcoming years Britain should arm itself as the decline
in the consumers spending and business investments will apply a stop to the economy of
UK. For instance the UK economy will produce GDP growth of approximately 1.9% this
year, fuelled by 2.5% rise in purchasing power of consumers on the back of low
inflation. However the performance is estimated to be aborted out as inflation will jump
to 2.6% next year and 1.8% in 2018 which will bring a decline in the consumer spending
of about 0.5% and 0.9% respectively (Hallerberg, Strauch and Von Hagen, 2007).
 The double Whammy impact will cause UK GDP sharply decline the growth to 0.8%
next year, before rising to 1.4% in 2018. As inflation returns it will minimize the income
levels and purchasing power of the public. A period of relatively low growth has been
faced by the UK economy which has build pressure on consumers and the cautious
approach to spending by businesses. The Office for National Statistics revised up its
reading for the UK economy in the run-up to the Brexit vote, with a development in the
GDP up-to 0.7% in the second quarter which was more as compared to the previous
estimate of 0.6% for the period. The value of sterling has declined up-to 18% against the
US dollar as the UK’s main economic indications held up since Britain voted to exit the

EU. The report prepared by the EY Item Club analysed a weak pound would cause a
development in exports by 4.5% in 2017 and 5.6% 2018. It was also evaluated that net
exports are estimated to add 0.8% to GDP next year, accounting for nearly all of the
expected developments in the UK economy (Sabel and Zeitlin, 2010).
 The domestic market flat activities will bring a growth in GDP and which will become
heavily dependent upon exports for the upcoming year, but after the exit of UK form the
EU's certain sectors, for e.g. aerospace, chemicals and auto-mobiles, that trade
extensively with the EU will be a lot more exposed and will face a need to be supported
by subsidies and more booming industrial policies.
Excruciating challenges of taking back control:
After Brexit the UK will have to negotiate at least minimum six deals to regain its
position in the sector, Grant of the Centre for European Reform Think-tank. Negotiations will be
far longer and more complicated beyond the realisations by British politicians. The following are
the set's which covered Britain’s EU divorce, the second contains the agreement of free trade
with the European union and a third is developed to carry out interim measures, the fourth on the
Grant’s list is about full membership of the World Trade Organisation, fifth has replaced the
trade deals which is enjoyed by the UK as an EU member and the last is sixth which will be to
differentiate the UK’s future relations with the European union on topics such as foreign,
defence and security policy. At the same time, the British government will have to work out how
to keep the country united. Then there is resetting a collection of policies and norms across
sectors which includes science and research, farming and fisheries, environment and support for
poorer regions. The huge and complex will be managed by a civil service that has reached a
postwar low in staff numbers against the backdrop of an economy teetering on the brink of
recession (Benington and Geddes, 2013).
The UK will have to make developments on a new commercial relationship with the EU.
Next task considered for the governing bodies in their to-do list is re-establishing trading
relationships with all major trading partners outside the EU. Full membership of WTO will be in
need to be regained by the UK and re-signing of approximately 39 trade deals covering 65
countries negotiated by the EU. WTO was joined by Britain in 1995 under the umbrella of the
EU, which specifies the member states in global trade. Key aspects of the EU’s terms of trade
could not simply be cut and pasted for the UK was strictly warned by the WTO. In order to re-