Our revised forecast for the full year 2019, based on International Passenger Survey data from the Office for National Statistics up to August, is for the value of inbound visitors spending to have grown by 9.1% to £25.0bn and the number of inbound visits by 1.7% to 38.5m.
If realised, this would be a new record for spending, beating the £24.5bn achieved in 2017. It would be the second highest number of visits seen after the record set in 2017.
Our forecast for 2020 is for spending to grow by 6.6% to £26.6bn and visits to grow by 2.9% to 39.7m. Both spending and visits are forecast to reach new records in 2020.
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 2020 and will review our forecasts in mid-2020 to take on board the final data for 2019.
The forecast assumes that Brexit will take place on January 31st, that the UK will proceed smoothly to a transition period and there will be no major disruptions to travel, and no major negative impacts that would discourage significant numbers of potential visitors. The forecast assumes that there will not be a no-deal Brexit and the UK will avoid associated problems with border queues.
The forecast also assumes no major disruptions or fears of disruptions as the UK approaches the end of the transition period at the end of December 2020.
While this forecast concentrates on inbound demand, Brexit creates many uncertainties for the supply side too, such as the status of migrant workers. This is a major concern for the industry given the reliance on EU migrant workforce with some in hospitality reporting difficulties retaining and recruiting EU nationals on their staff.
In VisitBritain’s latest Brexit consumer sentiment research, conducted in September 2019, 45% of European international travellers expressed some degree of concern about the uncertainty around travel arrangements (up from 38% in September 2018) although only 9% were very concerned. Around 35-50% expressed some worry about various potential practicalities or policy changes e.g. needing a visa, flight disruptions or mobile roaming charges. The tracking research has also found a significant decline in interest in visiting Britain amongst Europeans.
It is assumed there will be no unforeseen major events in 2020 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 an 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 value of the pound will depend on a number of factors, especially the Brexit outturn, but also monetary policy in the UK, USA and Europe and the strength of the UK, EU and US economies.
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 growth in 2020, the global economy has slowed since its peak in 2017/18. In the Eurozone, Germany narrowly avoided a technical recession. However, the short term outlook for the Eurozone is slow and forecasts for many countries in 2020 have been downgraded recently. In the USA, momentum has slowed, and the pace of jobs growth has cooled, though the US is not yet seeing the kind of sharp slowdown that suggests imminent recession. China’s GDP growth continues to soften and the trade war is a source of downwards pressure, but the outlook is still for consumer spending growth well over 6%.
At time of writing, the oil price currently averages $64, the same as its average level during 2019. Although this indicator has been volatile in recent years, in recent months it has been relatively stable (aside from a very short term jump in September). A higher oil price would push up the cost of air fuel and would negatively impact disposable incomes in most markets, and vice versa.
As ever, there are both upside and downside risks to the forecast. In the last few forecasts, risks were judged clearly to the downside. For 2020, the possibility of Brexit related disruptions aside, they are judged more balanced, weighted only slightly to the downside. It is possible that the global economy will slow quicker than expected – but also possible that the European economy could recover from its current sluggish growth rate.
|2018 Actual||2019 Forecast||2019 Forecast growth||2020 Forecast||2020 Forecast growth|
|Visitor spend (£bn)||£22.9bn||£25.0bn||9.1%||£26.6bn||6.6%|