Travelers flying long-haul from Britain in private planes and the premium cabins of jetliners will foot the bill for freezing departure taxes in coach, Chancellor of the Exchequer Philip Hammond said.
The U.K. Treasury will increase so-called air passenger duty for business- and first-class passengers by 16 pounds ($21) to 172 pounds, while lifting the fee for private journeys by 47 pounds to 515 pounds, Hammond said Wednesday in his Autumn Budget.
In announcing the increase, the chancellor described the cost of travel as “an important factor for families and businesses.” He then quipped: “Sorry Lewis,” an apparent reference to Formula 1 motor-racing champion Lewis Hamilton, who avoided VAT duty of 3.3 million pounds on the purchase of a private jet, according to reports citing leaked documents known as the Paradise Papers.
Airlines have been campaigning for years for governments to scrap APD, which is added directly to the price of a ticket. The new measures, which also extend a five-year freeze on the short-haul duty introduced by former Chancellor George Osborne, are due to take effect from April 2019.
The Airlines UK lobby group said Hammond’s announcement amounts to a “sleight of hand,” and that without a cut in APD the tax will remain the highest in the world. It added that the increase in long-haul duties may threaten the viability of some services, and with Brexit looming “doesn’t do anything” for the nation’s ability to open up links to emerging markets.
While Britain is Europe’s biggest private-jet market, evidence has emerged that U.K. demand for corporate flights is being held back as uncertainty around the split from the European Union hurts the economy and stymies bookings.
Private flights from Britain advanced 5.9 percent in the first nine months, versus an 11 percent jump in Germany, according to data compiled by the European arm of Warren Buffett’s plane-rental specialist NetJets Inc.
While Farnborough, 40 miles southwest of London, remains Europe’s busiest business-jet hub, and had the biggest increase in demand, Munich and Frankfurt ranked second and third for growth. The data refers to flights involving individuals worth at least 30 million euros ($35 million) and corporate executives, about a third of whom are bankers, NetJets said, adding that demand in the category is closely tied to economic growth.
Britain’s gross domestic product will increase by about 1.5 percent this year, according to European Commission estimates, compared with an anticipated 2.2 percent advance in Germany. London could lose 10,000 banking jobs and 20,000 more in other financial services as clients move assets out of the U.K. ahead of the split from the European Union, the Bruegel think-tank has forecast.
NetJets reported 7,550 flights from Britain in the nine months, putting it ahead of France, Italy and Switzerland, with Germany ranking fifth on 3,202 trips.
©2017 Bloomberg L.P.