Great Britain and Austria in the Wake of Brexit

by James Savage and Alex Macbeth

In manufacturing, tourism and the car industry, Brexit’s specter looms over several key Austrian regions and sectors.

Styria, Austria’s automobile manufacturing hub, could benefit from Japanese British-based car makers relocating to the southeast Austrian region. But the southeastern Austrian region could also face its own Stygian nightmare if car supply chains are destroyed in a no-deal scenario.

“The region of Styria has an important position for the economic relationship with the British. Jaguar Land Rover started building cars there in 2017, which has been a tremendous boost to the Austrian economy,” Barbara Kolm, director of the Austrian Economics Institute, told The Local, commenting on the growing car hub around the city of Graz.

“Austria will probably be hit less by Brexit than many other EU member states – the German ifo Institute expects a relatively modest decline of GDP of 0.1 percent because of Brexit,” added Kolm.

Nearly 50 per cent of all Austrian exports to the UK are in manufacturing. And it is Austria’s car industry that is perhaps most exposed to the roulette effects of Britain’s departure from the European Union.

“The only sector that might profit from Brexit is the car industry, especially in Styria,” Barbara Kolm told The Local. “Jaguar Land Rover could outsource even more of its production to Austria after Brexit, and the industry hopes to be able to lure Toyota to Austria as well. Fiat Chrysler has already announced that it will move its production of tractors to Styria.”

But Brexit could also turn out to be a two-edged sword for Austrian car makers. “All of this could just as easily go wrong as well, for example if Jaguar Land Rover instead were to decide to move completely back to Britain in the long run,” added Kolm.

Austria has a trade surplus with the UK and more than 100 Austrian companies are nevertheless active in the UK market – “among them Novomatic, Wienerberger, and Zumtobel,” adds Kolm.

Alpine states such as Salzburg, where tourism is a key industry, could feel a heavier Brexit burden. Nearly one million Brits, mainly winter ski tourists, visit Austria each year.

“Especially during the winter months in the Alpine regions, tourism is of substantial scale and must not be neglected,” Kolm told The Local. British visitors constitute the fourth largest visiting national group in terms of overnight stays.

Seasonal Businesses in Travel (SBIT) is a lobby group of more than 100 British tourist operators, created in response to Brexit, that aims to “increase awareness of the potential impact of Brexit on the UK outgoing travel industry,” through lobbying of “UK and European governments.”

When it comes to financial services however, experts agree that Austria is unlikely to win or lose much in the battle to lure financial services firms from the UK.

Most major Austrian banks, such as Raiffeisenbank, are fairly insulated against Brexit because they are focused on Central and Eastern Europe, Richard Grieveson, an analyst with The Vienna Institute for International Economic Studies (WIIW), told The Local. Only the few intimately intertwined with the City of London could suffer.

Vienna has also emerged as a potential new low-cost aviation hub in light of Brexit. EasyJet announced that it will operate its new airline easyJet Europe out of Vienna. All of the budget carrier’s EU27 aircraft will be re-registered at the new hub by March 2019, according to easyJet.

Ryanair is also looking to Austria as a post-Brexit stepping stone to the European market, having taken a stake in LaudaMotion, the low-cost airline founded by Austrian former Formula 1 world champion and airline pioneer Niki Lauda, reports The Local Austria.

Beyond the challenges in each sector, Austria’s current coalition government could also be an unpredictable force in the Brexit negotiations.

“With the centre-right and far-right in coalition, you see the implications on policy and it makes them unpredictable on Brexit,” Richard Grieveson, WIIW’s analyst, told The Local.

On July 1, Austria – traditionally a mainstream, moderate, member state – will take over the revolving six-month EU presidency.

Austria is most likely to use its term at the presidency to exert pressure on its neighbours rather than to get any special Brexit concessions, says Grieveson. While Germany is calling for all member states to make a larger contribution to the post-Brexit EU budget and fill the deficit left by the UK’s departure, Austria is reluctant to do so.

Another contentious issue on the horizon for the EU and for neighbours Austria and Italy is the future of South Tyrol.

With a high possibility that Italy’s far-right The League could enter government across the border in Italy, tensions over the much-disputed Italian region of South Tyrol (known as ‘Alto Adige’ in Italian) could ignite again between the two EU neighbours.

In December 2017, the current right-wing Austrian coalition government sparked outrage in Italy when it offered Austrian citizenship to German speakers in the bilingual region, the majority of which are German speakers, reports The Local Italy.

A pro-Austrian group in the Italian region, the Südtiroler Heimatbund, responded by placing ads on billboards in Vienna that read: “South Tyrol thanks Austria.”

The League’s controversial leader Matteo Salvini has promised “not to touch the autonomy” of the region, reports Italian news agency ANSA.

With regards to Brexit, the rights of Austrian citizens in the UK and Brits in Austria remain a quagmire issue. More than 10,000 Brits live in Austria, according to the Austrian national statistics agency Statistik. Approximately 25,000 Austrians live in the UK.

James Savage is Founder and Strategy Director of The Local Europe.

Alex Macbeth is an editor at The Local Europe.


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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