The Effects of Tourism on the United Kingdoms Economy - Literature review Example

The Effects of Tourism on the United Kingdom’s Economy s Introduction Tourism is travelling for business, recreational, or leisure purposes (Singh, 2008). Most nations use tourism as a tool for branding their country. Tourism has both positive and negative impacts (Law, 2002). Since the tourism sector is viewed as a driver of the economy, it attracts a lot of foreign exchange and employment opportunities. Lickorish and Jenkins (2007) argues that the direct contribution of tourism to the gross domestic product usually reflects the internal spending on travel and tourism and government individual spending, whereby the states spending on tourism industry is directly connected to visitors like cultural such as museums or recreational such as national parks. Britain’s tourism sector is shaped by supply and demand (Frey & Meier, 2010: 12). For instance, a total of 12.73 million overnight trips both overseas and domestic were made to the East of England in 2009 making it the fastest growing regions in relation to the volume of trips for the whole of England (East of England Tourism, 2009). Travel and tourism’s total contribution to the United Kingdom’s economy, taking into consideration the direct, indirect and induced impacts were as follows: 255 million jobs, $6.3 trillion in GDP, $1.2 trillion in exports, and $743 billion in investment (World Travel and Tourism Council, 2014). In that perspective, the paper is going to discuss the impact of tourism on the United Kingdom’s economy. These effects are both positive and negative. Discussion In the United Kingdom tourism has been the catalyst for economic growth (Page, 2011). With 29.2 million people visiting the United Kingdom in 2011, the nation is ranked as globe’s eighth largest tourist destination (WTTC, 2013). Foreign tourists spent over US$17.2 in the United Kingdom during that same period. The nation’s major tourist destinations are situated in London. The city plays host to the Tower of London which is the single most attraction that is mostly visited in the whole nation (VisitBritain, 2009). Positive effects The data by VisitBritain indicate that America remains the most-valuable inbound market, since the American visitors spent an estimated £2.1 billion in 2010 (VisitBritain, 2009). Inbound tourism is one of the UK’s top export industries and its record performance from the time when the Olympics was hosted bodes well for the future. It has continued to be the fastest growing sub-sector in tourism industry, with average amount spent by tourists projected to grow by over 7 percent annually (WTTC, 2014). The Department for Culture, Media and Sport (2014) argues that the value of inbound tourism is projected to grow from £21 billion to £57 billion from in 2013 and by 2015 respectively. In the respect, in a span of ten years the UK has forecasted an international tourism balance of payments surplus, almost forty years contributes an estimated £128 billion to the nation’s gross domestic product (GDP) and supports over 210, 000 small and medium sized enterprises. The revenue that is generated from overseas visitors leads to increased foreign exchange. This foreign exchange is very crucial both to the government and the local people (VisitBritain, 2009). VisitBritain (2009) adds that the domestic tourism has remained the largest component of spending in the UK’s tourism, with the 2009 expenditures amounting to £21,881 million. Additionally, there were 126 million trips made in 2009 (Office for National Statistics, 2010). The busiest period for the domestic travels in Britain is during the summer months and bank holidays. August has been recorded to be the busiest month. A direct contribution of the tourists’ activities to the GDP in 2012 was GBP36.9 billion. However, by 2013 this is forecast to increase to GBP37.7 billion (Tribe, 2011). This is majorly the economic activity that is generated by industries like travel agents, hotels, airlines and other services that offer passenger transportation excluding commuter services. But it also comprises of the restaurant activities and leisure industries that are directly supported by tourism sector. This direct contribution of tourism activities to the UK’s GDP is expected to rise by 4.8% annually to GBP59.9bn, which is 3.0% of the GDP by 2023 (WTTC, 2014). The tourism industry generates 1 billion job opportunities directly or indirectly (Wilkerson, 2003). In the UK, the tourism industry supports over 3 million jobs. The UK’s tourism offers employment opportunities to numerous local people, ranging from working in hotels, travel agents, in airline companies and other passenger transportation services, as well as in restaurants and other leisure industries that directly support tourists, to selling trinkets on the beach (VisitBritain, 2009). Devoid of the tourist industry, Britain would be having a much greater unemployment problem. The heritage-based tourism economy has resulted to a direct GDP impact of at least £4 billion and 134,000 jobs (Page & Connell, 2006). This employment is significantly higher than the 113,000 that was estimated in 2010 (Middleton, 2010). With most of the citizens employed, the living standards of the nation are also improved same to the nations’ GDP. By 2023, the tourism industry has been projected to support 3,076,000 jobs, which is 9.0% of total employment, an increase of 2.3% per year (WTTC, 2014:12). In Britain, the travel and tourism sector is projected to account for 1,292,000 jobs directly by 2023, an increase of 2.4 percent yearly over the next ten years (WTTC, 2014:14). Rose (2010) asserts that, since the end of the economic crisis, Britain’s economy together with the European economy has been underperforming in relation to other parts of the world. However, tourism has rising thus recording increased revenues even during the peak of the global financial crisis. Therefore, the WTTC (2013) argues that the revenue generated from tourism can been used to enhance the infrastructure network of the area. New communication lines, new roads, airports and other facilities that facilitate tourism can be built. This will take care of the increasing number of tourists, in addition to benefiting the local community. Another direct contribution of tourism in the UK economy is investment spending, for instance on the purchase of new aircrafts and the constructions of new hotels and accommodation facilities for the travelling tourists (WTTC, 2014). Another benefit as cited by the East of England Tourism (2009) is that government spending assists the tourism industry in various ways since it made on behalf of the community at large, such as aviation administration, tourism marketing and promotion, resort area sanitation services, and resort area security services. The other positive impact of travel and tourism on the UK’ economy is the domestic purchase of products and services by the specific sectors that directly deal with tourists including IT services by the travel agents, fuel and catering services by the airlines, and purchase of food items by the hotels (Lickorish & Jenkins, 2007). Visitor expenditure impacts on employees, businesses, the local authorities, the self-employed, and the government due to the fact the spending in one local business gets passed on to other and may also ends up partly as taxes. However, some of this expenditure leaks out of the area due to spending in non-local shops or on foreign services and products (Candela & Figini, 2012). Another effect is the front-line businesses like restaurants and hotels purchase supplies and services in order to run their businesses (VisitBritain, 2009). Therefore, suppliers experience the indirect effect of visitor spending. It is worth encouraging the tourism industry purchases locally-produced products and services in order to maximise on spending retention and economic benefits in an area (Tribe, 2011). The profits earned by the business owners of tourism-oriented enterprises and the suppliers to these front-line businesses and income earned by workers lead to induced economic impact. A certain fraction of these wages is actually spent in the local economy (Tribe, 2011). The economic value of surfing as a tourist activity has been acknowledged globally by various authors (Arup, 2001). Barbieri and Sotomayor (2012) argue that there has been reported growth in value in specialist surf tourism. In that perspective, another economic impact on Britain’s economy is the domestic surfing. A study by the South West Regional Development Agency in 2004 approximated the value of surfing to the Cornwall alone to be £65 million, and it was also responsible for creating 1,607 jobs (Bishop & Wiseman, 2005). A research study conducted in North Devon (Abel and Mallet, 2008) reported that £52.3 million was spent in surfing. According to Canniford and Karababa (2012), surfing is regarded as a serious leisure activity. Estimates by Carlos and Jose, (2012:555-573) indicate that surfers spend a yearly average of £495.21 on surfboards, wetsuits, clothes and other accessories, £708.45 on refreshments in the local bars and cafes spread across the UK, £587.30 on local convenience stores, £966.27 on fuel, an average of £170 is spent on UK accommodation, and £222.86 on car parking, although not all surfers travel abroad. The total expenditures per year on surfing and other surf related activities is approximated to be £2,013.82 without fuel and accommodation/foreign travel, £2,980.09 (Canniford & Karababa, 2012). Given that there are actually over 450,000 surfers in the United Kingdom, this equates to a direct economic activity contribution of between £1billion and £1.8billion annually spread between the regions and countries of the United Kingdom (Buckley, 2002: 425-6). When both induced and indirect effects are taken into consideration, these amounts add to £3.96bn and £4.95bn respectively. According to Abel and Mallet (2008) surfing as a tourist activity is just not a summer only activity, since there is utilization of coastal resorts and facilities that extends well into the winter months. As a consequence, the British economy is sustained by these off-season activities. Estimating the economic impact of surfing involves a combination of trip related expenditure and equipment related expenditure. This is because surfers need to travel to various venues, at times they may choose to refresh themselves, while others carry with them equipments for surfing. Therefore, the economy is usually impacted either directly or indirectly (Carlos, & Jose, 2012). Armstrong and Taylor (2000) found that the amount of jobs and wealth generated within the surfing area due to spending is not only a matter of direct jobs, but also the indirect effect of embeddedness such as local purchasing by the firms and the induced influence that is brought about by the employees spending their wealth locally. While many other tourist activities are seasonal, surfing is usually done throughout the year providing a shoulder to season activity. This s attributed to the fact that surfers utilise the water for the 12 months annually, as well as making use of beach extending beyond the summer peak day time to mornings, and finally evenings (Nelsen et al., 2007). Having the knowledge on the economic value of tourism is an important requirement for developing effective policies for tourism management (Carlos & Jose, 2012: 558). Studies on the economic effects of tourism also play a major role in supporting tourism services. In that perspective, employment and income estimates usually offer the justification and reason for local authorities and the respective governments in the United Kingdom to invest in initiatives that will support the tourism industry (Page, 2011). Negative impacts of tourism The jobs that are offered for the locals are often poorly paid, with poor working conditions. This reduces the staff motivation and overall job performance in the firm. As a result, the organization may realise reduced profit margins (Grant & Vidler, 2000:266). The next negative effect to the economy is that the large number of tourists easily damages the environment (Aramberri & Butler, 2005). As a consequence, the tourists bring problems like footpath erosion, littering, and pollution. All of these take substantial money and effort to clean up, funds which could have been channeled to other useful projects (Holden, 2010). The other negative effect of tourism on the Britain’s economy is that most luxurious hotels and accommodation facilities are a result of overseas investment. This means the revenues collected goes back to the country of origin. In some instances, these hotels take trade away from the local hotels and guesthouses (Swarbrooke & Horner, 2012) According to Page and Connell (2006:38), the prevalence of factors such as high unemployment, high inflation levels and interest rates, the demand for tourism is suppressed. This later reduces its overall contribution to the economy. Lastly, another recent threat of tourism is that it attracts terrorism activities since it is considered as a prime target for terrorists. This impact negatively to the country’s economy due to reduced airline travels and the number tourist visiting the country. Conclusion Tourism has both positive and negative effects (Ryan, 2003). However, the positive impacts outweigh the negative impacts since in most countries tourism is considered as the driver of economic growth. In the UK, the tourism sector is the fastest growing sector and a major source of revenue going by the statistics of the (WTTC, 2013) that pointed out that it generates approximately GBP106.3bn in 2012, and it is projected to grow by 1.7% in 2013, and to increase by 4.4% yearly to GBP166.1bn in 2023. The economic effects of tourism include indirect effects, induced effects, investment activity, and the state expenditure. First, indirect effects are generated from economic activity of the subsequent expenditure, for example, hotels buying supplies and the utilization of local services. Second, induced effects arise from spending the income got by the residents from profits and tourism wages. Next, the investment activity arises from capital investment in new aircrafts, hotels, automobiles and other facilities. Finally, the government impacts the economy through funding of the public sector. On the other hand, the negative impacts of tourist activities include degradation of the environment which is costly to restore, there is also repatriation of funds from the foreign investors, and finally, the tourist industry has some poorly paying jobs in the United Kingdom. References Abell, L, & Mallett, S. (2008). The Economic Value of Surfing in Northern Devon, Devon: TRISURF. Aramberri, J., & Butler, ‎. (2005). Tourism Development: Issues for a Vulnerable Industry. New York: Cengage Learning. Armstrong, H. & Taylor, J. (2000). Regional Economics and Policy, 3rd ed., Harvester Wheatsheaf, Hertfordshire. Arup, T. (2001). Assessment of the potential contribution of marinas and watersports to increasing prosperity in Cornwall. Ove Arup and Partners, Bristol, UK. Barbieri, C. & Sotomayor, S. (2012). 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