When many expected the global economic situation to be easing, the UK now faces a potential economic recession that could further disrupt the travel and tourism industry’s recovery.
The Covid-19 pandemic has had a devastating effect on the UK economy, reducing the number of businesses and increasing the cost of health-related expenditure. The additional problem of soaring living costs has affected consumer confidence and increased interest rates, resulting in Sterling’s decline in value. Consequently, both domestic and international tourism may not recover to the levels previously expected in 2022.
Surging cost of living will disrupt the domestic travel boom
The rising cost of living will force individuals with lesser salaries to control their spending, which will affect tourism revenue. In addition, it will affect the flow of domestic tourism in the UK, due to the impact on disposable income. This is likely to be problematic throughout the year, which will be a cause for concern for many tourism businesses. However, consumers with greater earnings, who are less affected by inflation, are more inclined to take vacations. Nevertheless, this is unlikely to make-up for the potential losses of lower income individuals and families.
As a result of the Russia-Ukraine conflict, global inflationary pressures have increased. This has tested the UK’s economic strength, with the national government under pressure to provide more support measures, both at a social and economic level. This has resulted in a contracting economy, which could eventually lead to a recession. As a result, tourism companies could think twice before investing in new travel products or expansion of the existing ones, potentially causing growth to stall.
The UK government needs to step in
The UK government should undertake changes to ensure that regulators take a holistic approach to protect financial stability by responsibly detecting, monitoring, and mitigating risks to financial stability. The government could also consider protecting the tourism industry from financial volatility by implementing measures such as economic stimulus packages, specific incentives to promote demand, and encouraging investments in sustainable tourism. This approach could limit the extent of the instability, protecting companies against uncertainty.
If the UK manages to limit the financial instability, the tourism industry is expected to grow and improve over the next few years. According to GlobalData’s opinion poll, “How will the performance of Travel & Tourism industry change in the short to mid-term (1-3 years)?” 55.6% of global respondents answered that it will significantly/somewhat improve. This demonstrates faith in the tourism industry’s comeback.