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What Brexit means for Kiwi travellers

19th December 2018

Updated November 1 2019

Unless you've been off grid for a couple of years or spending Seven years in Tibet, chances are you know at least this much about Brexit – the UK is leaving the European Union. When is still anybody’s guess as the UK has already missed their original deadline of 29th of March this year, as well as their extended exit date of October 31st of October. The new Brexit deadline is pencilled in for January 31, 2020.  Prior to that, the UK will be heading to the polls on December 12 to hopefully  make the whole process a bit easier.

If you feel like you need a Brexit refresher at this stage that's totally ok. Just head on over to our Brexit info page for a quick refresher with a handy glossary to make sense of all the gobbledygook coming out of the UK at the moment and pop back over.

Ok. So we know what Brexit is and within reason what it means for our friends in Britain, but how does it affect me as an Kiwi traveller heading to the UK and Europe? That's a tricky question to answer because Brexit and its flow on effects are connected to so many parts of our day to day and travelling lives, but we'll do our best.


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Deal or No-Deal; that is the question

Brexit is happening (unless there is a last ditch referendum, which is highly unlikely with Boris Johnson PM) and it's already brought down two Prime Ministers (anyone remember David Cameron?) but the one thing that most parliamentarians, contrarians, economists and businesses want to avoid like the plague is the dreaded No-Deal Brexit scenario.

What's so scary about leaving the EU without a workable divorce settlement? Plenty.

First of all, a Brexit deal is designed to allow the EU and Britain to part ways with stable agreements in place to continue to have a solid working and trading relationship. Britain isn't moving to another part of the world after the split, so the UK and EU will still be required to put their differences aside and work together. A Brexit deal encompasses things like trade tariffs, border movements and business taxes – all things that are instrumental in running a country.

The UK encompasses Scotland and The Republic of Ireland and Northern Island, regions that haven't been united in nearly 100 years. The current border situation in Ireland has been working well since Ireland joined the EU and renegotiation of a border plan is a huge sticking point for Brexit negotiators. There are also hundreds of thousands of workers currently working between the EU and UK who will find themselves in a spot of bother if no deal can be reached to ensure continuity of work and travel.

Basically, there could be a big difference between what Brexit actually looks like depending on a Deal or No-Deal scenario. The New Prime Minister, Boris Johnson has vowed to leave the EU on Halloween 'come what may' which has resulted in more than a few jitters across the UK, EU and indeed the world. These concerns are slowly being squashed though, as the premise of another extension and a law that rules out a no-deal currently are currently at play. 

Effect on the NZD

Just before Brexit went to a referendum in 2016, $2000NZD would have bought you around £900GBP (yuck) whereas today you are looking at over £980GBP for your hard earned NZD.

Since the 2016 referendum the buzzword for NZD/GBP foreign exchange has been – UNCERTAINTY. The Pound has found itself fluctuating every time a new deal was taken to parliament to vote on and was pounded every time something went awry with Brexit negotiations or business confidence dropped.

This uncertainty has led to many businesses heading back to the EU or simply moving their base of operations from the UK. With less confidence in the GDP resulting in less demand for the Pound, the currency is likely to face downward pressure on it until everything is resolved 100%.

While the NZD may be higher today against the GBP than it was before the referendum (curse you Britain for having such a strong currency) it has been under its own pressure due to the US/China trade war and domestic economic performance.

Will Brexit affect trade?

New Zealand is a reasonably small-sized, but highly trade-influenced economy, so it is extremely exposed to any downturn in global trade. As an example, our economy is currently waiting with bated breath to see the results of the trade war between China and the US. China is a big trading partner, so any hint of an economic slowdown in China will filter through to New Zealand and the NZD.

With this in mind, as the UK says ‘au revoir’ to the EU, it also says goodbye (kinda) to any of the trade agreements it held through the EU, including those with New Zealand.

The transition period will allow the UK to strike new trade agreements with the rest of the world, however the new agreements will not come into effect until the end of this period - 1 January 2021. Until then, the UK will continue to operate under its current agreements, hence the ‘kinda’.

The UK is consistently one of New Zealand’s top trading partners, so a new trade deal between our two countries will have an effect, as new deals could result in new (and different) tariffs. More tariffs (aka making things more expensive) will reduce demand for goods and service, which would see flow on effects for both economies and their respective currencies.

Despite New Zealand’s historical bond and ties to Britain as part of the Commonwealth, it is also imperative we maintain strong relations with the remaining EU countries, as they provide a significant contribution to our trade budget.

Why does this matter to Kiwi travellers? Well, New Zealand’s trade balance and partnerships have a direct influence on the value of the Kiwi dollar. Less demand for our exports due to tariffs means less demand for the NZD. Lower demand for our currency can diminish its value. The same thing can happen in reverse, though, so this certainly isn’t a bad news story (for us).

What are the consequences for New Zealand – Britain tourism?

It's not like Brexit has resulted in a turning of the travel world upside down for Kiwi travellers so some of the effects will be hardly noticeable.

First and foremost for Kiwi’s travelling to the UK is that fact that our NZD is higher than before Brexit was announced (YAY). For Kiwis travelling to Europe there is no change at all, Brexit won't directly affect your ability to work or travel within the EU - that's still covered by the Schengen system, which gives Kiwi’s a 90-day travel visa.

What Brexit could mean for Kiwis in the not too distant future is that the UK will be keen to negotiate new trade and visa deals with their closest mates. This could mean Kiwis looking to live or work in the UK for extended periods of time get longer or more privileged treatment as the UK looks to recoup workers and people following the inevitable outflow of European citizens leading up to and just after Brexit. Here's hoping!

For Brits travelling to New Zealand it means that the shoe will be on the other foot and their currency conversions may not look as rosy as they did in 2015. It's possible this could lead to a decrease in inbound tourism from the UK and similar to trade, fewer people visiting New Zealand means less demand for the NZD, so it could affect your travel money moving forward. This is a very long term outlook though and is more likely to affect local tourism operators than you.

Final tips for Kiwis travelling to the UK or Europe

No country has ever left the EU before and as much as we know about travel and currencies, nobody can predict what's going to happen next when it comes to Brexit. Every time you think you've got a handle on the situation along comes a spanner.

That being said, there are some tried and true steps you can follow as a smart traveller to give your back pocket the best possible shot at being full before your trip to the UK and to avoid any speed bumps.

  1. Sign up for Rate Alerts for the pound and euro. That way you'll be the first to know if the NZD is performing well.

  2. Educate yourself on what else impacts these currencies so you can make an informed decision of when to purchase.

  3. Be conscious of currency fluctuations when purchasing flights, accommodation and day tours. If the NZD is performing well against the pound, it will make your purchase cheaper. Taking advantage of a better exchange rate and purchasing things like tours and transport before you leave may also make your holiday cheaper, especially if the pound regains value whilst you were overseas.

  4. If the pound continues to weaken, it's worth taking advantage of an opportunity to splurge on things you otherwise wouldn't have been able to afford.

  5. Keep an eye on currency markets, especially around the key dates mentioned at the start of this article. Big announcements and the uncertainty that surrounds them will often trigger changes in the market.

  6. Safeguard your foreign currency and add Rate Move Guarantee to your purchase in store. It's free, and if the rate improves within 14 days we will refund the difference*.

The main thing is to stay as up to date as you possibly can from a number of different sources relating to Brexit. We're really getting down to the business end leading up to October 31 and fluctuations in the NZD, GBP and EUR are likely to be more pronounced during this time.

Nobody has all the answers when it comes to currency forecasting and anyone that says they do should be able to give you that week's Lotto numbers as well. Watch the news, follow Donald Trump's tweets, the Reserve Bank of New Zealand, the Bank of England and keep up to date with our NZD updates and you might just save yourself enough dollars for some extra fun on your trip!

This blog is provided for information only and does not take into consideration your objectives, financial situation or needs.  You should consider whether the information and suggestions contained in any blog entry are appropriate for you, having regard to your own objectives, financial situation and needs.  While we take reasonable care in providing the blog, we give no warranties or representations that it is complete or accurate, or is appropriate for you.  We are not liable for any loss caused, whether due to negligence or otherwise, arising from use of, or reliance on, the information and/or suggestions contained in this blog. *Terms and conditions apply to Rate Move Guarantee. See https://www.travelmoney.co.nz/rate-move-guarantee for more information.