Britain’s decision to leave the European Union has had many unexpected consequences, one of them being a flood of Hong Kong visitors to the UK as the Sterling’s collapse made travel, shopping and property purchases cheaper.
Data published on Monday by the travel analytics firm ForwardKeys revealed that flight bookings to the UK in the four weeks after the June 23 Brexit vote were up 7.1 per cent. Hong Kong people ranked first with 30.1 percent, followed by the US with 9.2 percent and Canada with 7.4 percent.
“The most favorable exchange rate in decades is probably the major driver for the uptake in bookings to Britain. The 10 percent drop in the value of Sterling after the referendum sharpened interest in the UK as a holiday destination from countries around the world,” ForwardKeys said.
The Brexit referendum caused the pound to slump to 31-year lows against the dollar, with no sign of a recovery to pre-Brexit levels. To compound matters, the currency dropped 2 percent against the greenback last Thursday after the Bank of England’s decision to cut interest rates to 0.25 percent for the first time since 2009.
For Hong Kong people, the most direct impact is in relation to travel, property and retail.
“I am in the UK looking at a property in the outskirts of London,” says Angela Lo, a retired schoolteacher on a visit to the UK. “Interest rates are almost zero, so property is a better place to put your money.”
“With the drop in Sterling, prices here are more attractive. London will continue to be an excellent rental market, despite Brexit, with students, foreigners and British people working here. Also, Hong Kong people have a good feeling toward Britain and feel comfortable here,” Lo says.
Another factor that is prompting increased interest in Britain is a “possible deterioration in our life in Hong Kong”, she says.
“It is good to have a bolt hole, if necessary,” says Lo, who is buying cosmetics and health products to take home.
“Buying them here was always cheaper than in Hong Kong. Now they are even better value. Britain is a truly capitalist place, where competition drives down prices.”
Thanks to the slide in the British currency, the gap in prices of British products sold in Hong Kong and London is widening.
A Burberry classic trench coat, for instance, costs HK$14,500 in the firm’s Hong Kong online store, compared with the equivalent of HK$12,020 in the British store. That makes the British price about 17 percent cheaper.
In another example, Body Shop sells a tea-tree facial wash for HK$55.30 in Britain versus HK$149 in Hong Kong.
Luxury goods have seen a bump in UK sales, with brands such as Burberry, Prada, Richemont, Hermes, Swatch and Ferragamo among those that are benefiting.
The UK is the world’s sixth-largest market for luxury spending, at US$17.2 billion a year. Chinese are the biggest buyers of such goods in London, as is the case in many other countries.
For Hong Kong people, London and Manchester are the most popular destinations. They can get air fares, including tax, for as little as HK$4,425 and HK$4,900 for the two cities.
Property consultancy CBRE said on Monday that UK commercial property values dropped 4.1 percent in July, led by a 6.1 percent fall in central London offices.
Within a week of Brexit, Magnificent Real Estate announced the purchase of the 408-room Travelodge Royal Scot hotel near Kings Cross in central London for 70.3 million pounds.
Chairman William Cheng Kai-man (鄭啟文) noted that UK property prices were much cheaper than those in Hong Kong.
“The sharp fall in Sterling after Brexit will bring more tourists and investors to London, a city known for its rich heritage, lifestyle, architecture and protection of assets. We will continue to make acquisitions there in the next year, increasing the number of our hotel rooms there to 1000,” he said.
Pointing out that Britain is an international tourism center, with 18 million people/visits per year, Cheng said he is “confident that Britain can do things their way and be as successful as they were in the last two centuries”.
But not everyone is as bullish as Cheng. The consensus among experts is that Brexit will be bad for the British economy and slow growth.
The Institute for Fiscal Studies in London said on Tuesday that membership of the single EU market could be worth four percent of GDP to the UK, equivalent to almost 80 billion pounds a year, compared with membership of the WTO alone.
“While leaving the EU will free the UK from an estimated eight billion Sterling a year of budget contributions, the loss of trade from Brexit will hit tax receipts by a larger amount. New trade deals will not make up for lost EU trade, which accounts for 44 percent of British exports and 39 percent of service exports,” it said.
It is this pessimism that is deterring some Hong Kong firms from investing there.
In mid-July, Great Eagle Holdings chairman Lo Ka-shui announced suspension of a 250-million-pound property project in London because of uncertainty following Brexit.
Explaining his caution, the businessman pointed out that seven listed property funds in Britain had halted client withdrawals following the British vote.
When you see seven property funds halting redemptions, it should make you think, he said.
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