We have identified a number of risks and assumptions when making our forecast and have briefly detailed these below. We will continue to monitor our forecasts during 2019 and will review our forecasts to take on board the final data for 2018 and the latest provisional 2019 data.
Brexit remains a key uncertainty. At time of writing (February 2019) there is still little clarity on the settlement post March 29th. The forecast assumes there will be no major disruptions to travel.
We note that the first seven weeks of 2019 (four of which took place after this forecast was initially run) have seen weak flight bookings from Europe. Flight bookings to the UK made through indirect channels during this period (i.e. bookings made in these weeks, for arrival in the UK any time) were significantly down year-on-year. Bookings from long haul markets were broadly in line with those made a year earlier but European bookings were down sharply, especially for arrival after March 29th. Although weekly flight bookings data can be noisy, this is a major concern. A decline in confidence in travel post March 29th is a significant and growing downside risk to this forecast and the outturn from European markets in particular could be significantly less than this forecast assumes.
It is assumed there will be no unforeseen major events in 2019 that disrupt overall international tourism or travel to Britain in particular, e.g. terrorism, health scares or natural disasters.
The ongoing value of the pound is a key uncertainty. The pound remains much lower than its pre-referendum level and is forecast to continue to be weak throughout the medium term, although the exact path of the exchange rate is a source of uncertainty in the forecast. The central forecast is for Sterling to strengthen slightly from its current rate of around €1.14 and $1.29 by the end of 2019 although the average exchange rate in 2019 is forecast to be similar to 2018. The value of the pound will depend on a number of factors including Brexit, monetary policy in the UK, USA and Europe and the strength of the UK, EU and US economies. VisitBritain’s consumer sentiment research has found that while there is still widespread agreement that the weak pound makes it a good time to visit the country, the favourable exchange rate is less top of mind for travellers than it was in 2016.
The global economy, and in particular the economic performance of the UK’s main source markets, are always important drivers of visitor numbers. While the outlook is still for moderate growth in 2019, the global economy has slowed somewhat since its peak in 2017/18. The Eurozone economy experienced a tough second half of 2018 with unexpectedly weak growth. Economic fundamentals remain benign for now in the USA, especially the labour market, despite considerable volatility on Wall Street. The Chinese economy continues to slow gradually, exacerbated by the ongoing trade war with the USA. There are many signs that the “cyclical peak” of global growth is now behind us, with risks to the downside.
The price of oil currently stands at $62/barrel, having fallen from a high of $86 in October to around $50 at year end before a partial rebound. This indicator has been volatile in recent years. The decline from the high point will aid disposable incomes and will help reduce travel costs although is itself a reflection of worries about global growth.
There are both upside and downside risks for 2019. However, risks are weighted to the downside, especially given the possibility of a no-deal Brexit (and, in the short term, concern about a no-deal Brexit) as well as the possibility of the global economy slowing quicker than expected.
|2018 Nowcast||2018 Nowcast growth||2019 Forecast||2019 Forecast growth|
|Visitor spend (£bn)||£23.1bn||-5.9%||£24.9bn||7.8%|