Austria's chancellor, Sebastian Kurz, has warned that European leaders must do everything possible to prevent a hard Brexit, and Austria will 'do all [it] can' to avoid a no-deal Brexit. A no-deal Brexit could put 6,000 jobs in Austria in danger, particularly in the wholesale and retail trade sectors. Austrian banks could also suffer, and the country's tourism industry could be impacted, with nearly one million Brits visiting Austria each year.
Characteristics | Values |
---|---|
Jobs at risk | 6,000 |
Jobs at risk in Germany | 100,000 |
Financial services | Austrian banks could suffer |
Tourism | Could be negatively affected |
Airlines | Could be negatively affected |
Trade surplus with the UK | Yes |
No. of Austrian companies active in the UK market | 100+ |
No. of Brits living in Austria | 10,000 |
No. of Austrians living in the UK | 25,000 |
What You'll Learn
The impact on the car industry
Austria's car industry is particularly exposed to the effects of Britain's departure from the European Union. Styria, Austria's automobile manufacturing hub, is home to a growing car hub centred around the city of Graz. This region has an important position in Austria's economic relationship with the UK.
Styria's economic ties with the UK were strengthened in 2017 when Jaguar Land Rover began building cars there, providing a tremendous boost to the Austrian economy. However, the region's prosperity is at risk if car supply chains are disrupted in a no-deal Brexit scenario.
Austria's car industry is vulnerable as nearly 50% of all Austrian exports to the UK are in manufacturing, and the UK is Styria's fourth-largest export partner. Just over 4% of all exports from Styria are destined for the UK, totalling €875 million in 2018.
A no-deal Brexit could result in potential tariffs and higher export costs, which would have an immediate impact on the Styrian economy. An additional €239 million in Styrian service exports are also vulnerable in the event of a no-deal Brexit, according to a report by the Styrian regional government.
On the other hand, the car industry in Styria could benefit from Japanese carmakers relocating from the UK to Austria. Fiat Chrysler has already announced plans to move its production of tractors to Styria. Jaguar Land Rover may also increase its production in Austria, and there is hope that Toyota could be lured to the region as well.
However, there is a risk that carmakers like Jaguar Land Rover could decide to move their operations back to Britain in the long run, highlighting the uncertainty faced by Austrian car manufacturers in the wake of Brexit.
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The impact on tourism
Tourism is a key industry in the Austrian state of Salzburg, and a no-deal Brexit could have a significant impact on the sector. Nearly one million British tourists, mainly winter ski tourists, visit Austria each year, constituting the fourth largest visiting national group in terms of overnight stays.
A no-deal Brexit could lead to disruptions in travel between the UK and Austria, affecting the ability of British tourists to visit Austrian ski resorts. This could result in a decline in revenue for the Austrian tourism industry, particularly in the Alpine regions during the winter months.
Additionally, a no-deal Brexit could cause the pound to weaken against other currencies, including the euro. This would make it more expensive for British tourists to travel to Austria, potentially leading to a decrease in the number of British tourists visiting the country.
To mitigate the potential impact of Brexit on tourism, Austria has taken steps to attract more non-British tourists. For example, the country has invested in marketing campaigns targeting visitors from other European countries and Asia.
Furthermore, Austrian airlines have prepared for Brexit by establishing subsidiaries within the EU. For instance, Easyjet has set up an Austrian subsidiary, transferring its aircraft and crew licenses to ensure it can continue operating flights within the EU. Ryanair has also expanded its presence in Austria by investing in LaudaMotion, a low-cost airline founded by former Formula 1 world champion Niki Lauda.
While a no-deal Brexit poses challenges to the Austrian tourism industry, the country is working to adapt and minimise any negative consequences.
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The impact on financial services
A no-deal Brexit would have a significant impact on financial services in Austria. Austrian banks and financial institutions could suffer due to the loss of passporting rights, which allow firms authorised in one member state to operate anywhere in the single market without further regulatory approval. This may result in some UK financial firms relocating to other European cities, such as Frankfurt or Paris, as suggested by Dr Barbara Kolm, director of the Austrian Economics Center. This could lead to a potential loss of 6,000 jobs in Austria, according to a report by the Leibniz Institute for Economic Research Halle (IWH) and the Martin Luther University Halle-Wittenberg.
In the event of a no-deal Brexit, the UK will have to rely on 'regulatory equivalence' to access EU markets. However, this arrangement has two key weaknesses: it is less extensive than passporting, excluding large parts of financial services such as banking and investment products; and it can be revoked by the European Commission with only 30 days' notice. This creates uncertainty for UK financial firms and may deter future investment in the sector.
Austrian financial services companies that currently have commercial activities with the UK will be affected by a no-deal Brexit. This includes companies and funds established in the UK with business activities in the EU, as well as companies and funds established in an EU member state with business activities in the UK. These companies will need to prepare for the potential loss of passporting rights and the impact on their business operations.
Cost increases in certain areas are also possible in the event of a no-deal Brexit. For example, UK-based payment service providers may lose direct access to central payment infrastructure, leading to slower payment processing or higher costs for consumers with accounts in British banks.
Overall, a no-deal Brexit would disrupt the highly interconnected financial markets between the UK and the EU, leading to increased regulatory scrutiny and potential job losses in both the UK and Austria. Austrian financial institutions should prepare for the potential risks and opportunities arising from the loss of passporting rights and the transition to regulatory equivalence.
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The impact on trade
Austria's Chancellor Sebastian Kurz has stated that Austria and Germany will "do all we can" to avoid a no-deal Brexit, and that both countries agree on the importance of avoiding the UK leaving the European Union without a trade deal.
Austria is a country that will be affected by Brexit more indirectly through trade with Germany and other countries closely connected to Britain than directly. A report by the German think tank the Leibniz Institute highlights which countries and industries will be most affected in 43 countries. The report also named Austria as particularly exposed in certain sectors.
Austria's car manufacturing hub, Styria, could benefit from Japanese British-based car makers relocating to the region. However, the region could also face significant losses if car supply chains are destroyed in a no-deal scenario. The United Kingdom is Styria's fourth-largest export partner, with just over 4% of all exports from the region destined for the UK. A no-deal Brexit would result in potential tariffs and higher export costs, which will "have an immediate impact on the Styrian economy."
Nearly 50% of all Austrian exports to the UK are in manufacturing, and it is Austria's car industry that is most exposed to the effects of Britain's departure from the European Union. However, the car industry is also the only sector that might profit from Brexit, especially in Styria. Jaguar Land Rover could outsource even more of its production to Austria after Brexit, and the industry hopes to lure Toyota to Austria as well. Fiat Chrysler has already announced that it will move its production of tractors to Styria.
Austria has a trade surplus with the UK, and more than 100 Austrian companies are active in the UK market, including Novomatic, Wienerberger, and Zumtobel. However, Austrian banks could suffer due to a possible partial move of London's financial sector to Frankfurt or Paris.
Overall, while Austria is more insulated from a no-deal Brexit than many of its neighbouring countries, a no-deal scenario would still have significant negative impacts on the country's trade, particularly in the car manufacturing and financial sectors.
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The impact on jobs
A no-deal Brexit could have a significant impact on jobs in Austria, with a report by the German think tank the Leibniz Institute highlighting the country as particularly exposed in certain sectors.
The report estimates that 6,000 jobs in Austria could be at risk in the event of a no-deal Brexit, with the wholesale and retail trade sectors expected to be the most vulnerable. The country's financial institutions could also suffer, with Austrian banks potentially affected by the relocation of London's financial sector to other European cities like Frankfurt or Paris.
The car manufacturing industry in Austria, particularly in the Styria region, is another area of concern. While a no-deal Brexit could result in Japanese carmakers relocating their production to Austria, there is also a risk of supply chain disruptions that could negatively impact the industry. Nearly 50% of all Austrian exports to the UK are in manufacturing, and the car industry is highly exposed to the potential negative consequences of Brexit.
In addition, the tourism industry in Alpine states such as Salzburg could be affected by a reduction in British tourists, who constitute a significant portion of visitors to the region, especially during the winter months.
However, it is important to note that Austria may be less affected by a no-deal Brexit compared to other EU member states, with the German ifo Institute predicting a relatively modest decline of 0.1% in GDP as a result of Brexit.
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Frequently asked questions
Austrian Chancellor Sebastian Kurz has stated that Austria will "do all [it] can" to avoid a no-deal Brexit.
A no-deal Brexit would put 6,000 jobs in Austria in danger, particularly in the wholesale and retail trade sectors. The car manufacturing industry in Austria is also vulnerable, as it is heavily exposed to the effects of Britain's departure from the European Union.
Nearly one million British tourists, mainly winter ski tourists, visit Austria each year. Alpine states such as Salzburg, where tourism is a key industry, could feel a heavier Brexit burden.
Austrian banks could be affected by a possible partial move of London's financial sector to other European cities, such as Frankfurt or Paris.