The Future of the UK Tourism Industry - Essay Example

How the Current Global Economic Condition is Likely to Affect the Future Growth of Tourism in the UK The tourism industry acts as a vital source of foreign exchange to the U.K. as it ranks third among the country’s export earners. Statistics reveals that international visitors spend over £18 billion annually in the U.K. (World Travel & Tourism Council 2006). In addition, the foreign tourists contribute over £3 billion in the form of taxes and duties. Accordingly, when the international and domestic tourism is combined, contributes over £115 billion yearly. Apart from the earnings received from the tourism industry in the country, it also employs more than 2.6 people, which accounts for 9 percent of the economy of the U.K. The figures represent significant growth in the tourism industry relative to 1999 in which, there were about 25.5 million foreign visitors that contributed approximately £61 billion and that the industry employed only 1.8 million people (World Travel & Tourism Council 2006). This shows the extent to which the economy of the U.K. depends on the tourism industry. Recent survey also shows that the tourism industry of the country continues to grow despite the backdrop caused by economic recession witnessed in recent times. This paper explores the current global economic conditions likely to affect the future growth of the tourism industry in the U.K. Tourism has become an important industry to many countries, which relies on it as a source of foreign exchange and employment (World Travel & Tourism Council 2006). The U.K. is an example of countries whose economies highly depend on the tourism industry. As such, the government of the U.K. has put in place measures aimed at promoting tourism in the country. This includes building modern infrastructural facilities, maintenance of peace and political stability, and ensuring that tourist attraction sites are well managed to attract as many tourists in the country (Aramberri and Butler 2005, p.215-218). As earlier stated, the U.K. tourism sector is the third export earner for the country after chemical and banking industries. The U.K. is also ranked seventh biggest tourism industry in the world according to 2011 economic survey (World Travel & Tourism Council 2006). This industry contributes billions of shillings to the country’s gross domestic products (GDP). The recent figures showed that the industry received approximately £18 billion from foreign tourists who also contributed another £3 billion in the form of taxes and duties. The sector also employs more than 2.6 million U.K. citizens who depend on the sector for their source of income and accounts for about 9% of the economy of the U.K. (Bardgett 2000, p.7-8). Most tourists who visit the U.K. originate from the U.S. with visitors spending more than 2.1 billion according to the 2010 tourism report. Nonetheless, the figures also reveal that a large number of tourists mainly come from Europe than North America. According to 2010 report, about 21.5 million visitors came from Europe with only 3.5 million originating from either America or Canada. The Tower of London is reported as the principal tourist attraction in the country (World Travel & Tourism Council 2006). Apart from foreign tourists, the U.K.’s domestic tourism sector is also highly developed contributing billions of pounds in spending. For instance, the latest report showed that the U.K’s domestic tourism contributes about £21 billion every year (Bardgett 2000, p.8). The U.K economy The United Kingdom’s economy is seventh largest in the world in terms of nominal gross domestic product (GDP) and ranks eight worldwide by purchasing power parity (PPP). The U.K’s economy also ranks third in the entire Europe just after Germany and France according to GDP but comes second according to PPP after Germany (Giudice, Kuenzel, Springbett 2012, p.6). The U.K’s economy is arguably one of the economies that have suffered hugely from the recent global financial crisis that began in 2007, which led to economic recession (Giudice, Kuenzel, Springbett 2012, p.4). The country is in the process of trying to revamp back from the crisis. However, it is noted that despite the efforts being put in place to stabilize the economy, nothing much has been realized. Recent statistics for the last equator of 2012 reveals that the country’s GDP figures expanded by 1% from the previous quarter according to the U.K. Office for National Statistics. This is after the economy shrank by about 0.3% in the first quarter according to the European Union’s executive in Brussels (Lickorish 2012, p.14). This figure reveals that the economy of the U.K. is still very weak. Furthermore, the country’s GDP is only expected to grow at just 0.9% in 2013. O’Brien (2012) argues that the persistence of low credit availability in the country continue to hinder economic recovery despite demand for credits also falling low. Inflation The state of the economy of the U.K. has seen inflation rate keep rising every month, and this is projected to continue unless drastic control measures been on increase over the last few months which began immediately after the financial crisis in 2007. For instance, after slowing down to 2.2% in September from 2.5% in August, inflation began witnessed another increase in October in which the figures stood at 2.7 %. The impact of inflation being witnessed in the country has made life difficult to many citizens, which has also impacted many sectors of the economy, tourism, not an exception. For instance, it costs an individual £66.75 to fill a 50-liter tank, whereas the same 50-liter tank used to cost only £40 to fill just five years ago. The cost of housing also rose from 2.6% to 3.2% between 2011 and 2012. Generally, the bank of England is required to contain inflation at 2%, but has not done so because of the hard economic situations, which would force it to raise interest rates, a thing it is not willing to do (BBC News 2012). Interest rates The zero economic growth in the economy of the U.K. has maintained the interest rates of the country at 0.5%. However, some economists predict that the country’s interest rates are likely to increase to about 0.75% from 2014 to 2017. Some economic experts, however, believed that the inflation rates might decline to below the current 0.5% in a few months to come because of the injection of cash amounting to £375 billion by the Monetary Policy Committee (MPC) to help boost the economy of the country (Robinson 2012). Employment level The global financial crisis that hit the U.K. is said to have affected the job market drastically leading to many people being laid off from work as a cost cutting strategy. Nevertheless, few jobs were still being created despite the economic depression. The unemployment rate in the U.K stands at 7.8%, which accounts for about 2.51 million people according to the latest economic survey in 2012. This was a minor drop from the last quarter where inflation rates stood at 8.0%. A survey conducted by the labor force survey (LFS) between July and September 2012 revealed that approximately 29.58 million people are employed in the country. This figure accounts for about 71.2% of the working age rate of employment. The figure also showed that over 100,000 jobs were created during the last quarter of 2012. The good thing is that the employment rate is expected to improve as the economy improves, which would see more jobs being created in the country (Hoban 2012). Based on the on the economic indicators discussed above, it becomes apparent that the current economic situation prevailing in the U.K. will slow down the growth of the tourism sector in the country. It is more likely that the tourism industry will stagnate over the next 10 years due to slow growth of the U.K’s economy. A look at U.K’s GDP reveals that the country’s economy is very weak after being hit by the recent financial crisis, which began in 2007. The GDP appears to stagnate as the recent figures show that it only improved by a mere 1% (O’Brien 2012). Furthermore, the GDP is expected to grow only by 0.9%, in 2013, with some experts still skeptical of the growth. This implies that the country may not be in a position to invest well in the tourism sector due to financial constraints thereby slowing down the growth of the tourism sector in the country. The current and future predictions of inflation in the U.K. will also hamper growth of the tourism sector in the country (Graduate Prospects 2012). Currently, inflation rate stands at about 2.7%. This has driven prices very high for citizens in the country. This implies that many domestic tourists who used to save some money for domestic tourism in the country are being forced to avoid engaging in tourism in a bid to save some ponds for meeting basic needs. This will certainly affect the domestic tourism sector in the country negatively. Furthermore, there are no signs of containing inflation in the country which will certainly slow down domestic tourism in the country. The foreign visitors in the country will also be affected by the current inflation rates. This is because the increase in inflation implies an increase in transport cost, meals, accommodation, and other services. This scares foreigners from visiting the country thereby affecting the tourism sectors (World Travel & Tourism Council 2006). This implies that not unless the government of U.K. through the Bank of England contains inflation then the country will more likely see a decline in the tourist sector in the country. The interest rates of the country are also still high which lowers the rate of development in the country thereby affecting the rate of growth of the tourism sector in the U.K. As earlier stated, the interest rate of the country is expected to increase from the current 0.5% to 0.75% in the future (Robinson 2012). This points bad things for the tourism industry. This is because many businesses that are likely to develop to promote tourism will be affected as they will be scared from borrowing money from banks to establish businesses such as hotels to promote tourism sector in the country. These will slowdown the growth of the tourism industry in the U.K. in the coming years. The state of employment in a country also impacted hugely on the growth of the tourism industry in the U.K. it has been demonstrated that the global economic crisis that hit the U.K. affected the U.K. job market as some employees had to be laid off to cut down cost. Nevertheless, the statistics show that a great number of people in the U.S. are still employed, a figure, which stands at about 71.2% (Hoban 2012). This promotes the tourism industry as the statistics show that a majority of U.K. citizens is in a position to engage in domestic tourism because they are in a position to spare extra money for leisure. In addition, the survey shows that the employment rate in the U.K. has been on the increase despite the economic recession and is expected to increase (Hoban 2012). This is good for the future of the tourism industry in the U.K. Furthermore, the fact that many people are employed gives the government the opportunity to concentrate on developing tourism industry, as opposed to focusing much on job creation. This will see the tourism sector improve greatly. Moreover, the U.K. has enough workforces to be employed in the tourism industry in the future. Conclusion The U.K’s economy is heavily dependent on the tourism industry as a source of foreign exchange and therefore, has to do everything it takes to promote its growth. Indeed, the industry has experienced growth over the last few years despite economic hardship. Nevertheless, the economic situation will probably slow the growth of the industry in the near future. This is because the economy has not been able to recover from the global financial meltdown that has stagnated GDP growth, increased inflation, interest rates, and unemployment. \ References Aramberri, J., & Butler, R. (2005), Tourism Development: Issues for a Vulnerable Industry. London: Channel View Publications. Bardgett, L. (2000), The Tourism Industry. Economic Policy and Statistics. House of Commons Library. Research Paper 00/66, P.7-35. BBC News (2012), UK inflation rate rises to 2.7% in October. http://www.bbc.co.uk/news/business-20310102 (Accessed 5 Nov. 2012). Giudice, G., Kuenzel, R., & Springbett, T. (2012), UK Economy: The Crisis in Perspective. Abingdon. Routledge. Graduate Prospects (2012), Overview of the hospitality, tourism, and sport sector in the UK. http://www.prospects.ac.uk/hospitality_tourism_sport_sector_overview.htm (Accessed 5 Nov. 2012). Hoban, M. (2012), UK unemployment falls again in three months to July. 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