For the final post in our ‘In The Age Of Brexit’ series, we examine the financial implications for companies who rely on business travel. Don’t miss Part 1: 5 Tips to Help Manage Corporate Travel and Part 2: 4 Key Concerns for Business Travelers.
Last week, UK Prime Minister Theresa May presented her Brexit withdrawal agreement to parliament. The reaction was almost entirely negative, leading the pound to plunge to a record low and continuing a seemingly never-ending political fiasco.
UK businesses will be keen to know – sooner rather than later – where they stand, and international companies are still keeping one eye on the evolving situation in the UK. Whatever happens next, one thing is for sure – the after-effects of this political upheaval will be felt for many years to come, whether Brexit comes as foe or friend.
The immediate financial effects of Brexit
Following Theresa May’s proposed deal, the pound saw its biggest one-day drop since shortly after the Brexit vote. The decline of sterling is having, and will continue to have, a serious impact on the UK economy, affecting businesses and consumers alike. In the immediate aftermath of the referendum, the pound dropped 2.6% against the euro and 4.2% against the US dollar.
Since the referendum, corporate travel in the UK has seen a marked decline. UK businesses have been reining in spending as the pound continues to fluctuate and weaken and travel costs soar. In the year following the Brexit vote, business travel in Western Europe was booming, with $270 million spent on business travel. The aftershock of the Brexit vote, however, had a clear effect on UK business travelers. Large growth in Germany (5.6%), France (3.9%) and Spain (6.3%) puts the UK’s decline (-0.7%) in perspective and points towards a worrying trend for UK business.
Despite this, London remains a key international business hub and will continue to do so, regardless of the effects of Brexit elsewhere. The capital’s economic growth continues and shows no sign of slowing down. While older companies move away from Europe’s top startup hub, newer companies expanding their offices and offerings for the European and global markets know that the UK and London, in particular, play a strategic role.
Gideon Pridor, VP of Marketing
London is, and will continue to be, one of the most important hubs for business travelers and companies around the world. TravelPerk recently opened an office in London, because in global corporate travel you understand that London has a central, strategic role. With or without Brexit, it just makes sense for us to be there both as an international company and as a service provider for our customers.
The importance of planning for an uncertain financial future
Embracing the Internet Of Things (IoT)
Attracting and retaining top-class talent will be increasingly difficult for companies. Millennials demand that their work delivers a more satisfying experience – more so than previous generations – and a company’s travel policy can make or break a business traveler’s experience. But tightening the purse strings shouldn’t mean subjecting employees to austerity and will drive top talent away. Instead, the best companies will move towards personalized travel programs, embracing the Internet of Things and optimizing the corporate travel experience. CFOs will increasingly be the catalyst for this shift.
The most relevant skills for modern CFOs are managerial common sense and creative strategizing. They are no longer simply expected to track growth, efficiency and performance. Charged with planning top-down strategies and being agents of change within their organizations, CFOs must drive technological transformations. This takes a willingness to take risks and think creatively.
The IoT is being heralded as the future of the global economy. Emerging technologies are propelling this transformation towards connected systems and automation and, with online travel tools constantly innovating, travel management is entering a new era. Revolutionary accommodation platforms such as Airbnb and apps enabling instant navigation, connectivity and information have added a new dimension to business travel.
For all the current uncertainty, the future is certainly bright. And the fractured nature of Brexit only fuels the drive towards a more connected, digitized world and a more engaging corporate travel experience.
According to the UK treasury, workers’ salaries could drop between 2.8% to 4% post-Brexit. With other financial pressures hitting companies, CFOs are tasked with easing the fears of business travelers, who will be concerned that their travel experience is under threat. For a CFO, expense management is a difficult balancing act. They need to oversee a process that delivers value for the company, while always looking to minimize inconvenience for the business traveler.
Therefore a tweaked travel policy that empowers employees is a must. Through a system that enables expenses to be paid back faster or through issuing a prepaid corporate card, businesses could ensure the wellness of their workers is paramount. Also, by utilizing an online travel tool that enables employees to tailor their trip to their own tastes and expectations, business travelers are given more control over their experience and the expenses that they might incur, all while remaining compliant with travel policy.
Corporate travel as investment
Despite the potential damaging effects of Brexit, the perception of business travel is shifting. Companies are increasingly realizing the importance of travel to gain and retain customers, expand markets and develop international branding. For this reason, instead of seeing corporate travel as a cost, companies are now seeing it as an investment.
Business travel accounts for $1.3 trillion of global spending annually (£39bn in UK alone) and this is set to rise at 3.7% per annum over the next ten years. Business travel accounts for £39 billion of annual spending in the UK ($1.3 trillion globally) and this is due to rise 3.9% per year over the next decade. This indicates that, despite the setbacks brought on by Brexit, companies are ready to embrace business travel and oversee an evolution in the experience of the business traveler.
But cost is still key. Some companies believe there’s no scope to make savings on business travel. This points to a lack of awareness, but not from the leading companies. Increasingly, finance managers and CFOs are breaking away from conventional approaches. They are leaving old, outmoded ideas in the past and embracing leading-edge technology and systems. And as conventions, methods and trends change, so too do the people implementing them. Millennials already account for the largest segment of business travelers and by 2020 they will make up more than half of the global workforce.
A new generation of CFOs will be at the forefront of the next era in corporate travel, not just riding the wave of change, but actively shaping it.