ABTA – The Travel Association and UKinbound have urged the Chancellor to consider the unique position travel businesses are in, as he prepares for next week’s Autumn Statement.
The trade bodies say that despite a decent summer the travel industry is trailing other sectors when it comes to its recovery and has entered the cost of living crisis at a very different starting point to the rest of the UK economy.
International travel started to return only after UK travel restrictions were lifted in March this year. This return to business was significantly later than the rest of the UK economy – including the retail and hospitality sectors, where domestic restrictions were lifted in July 2021.
Despite travel restrictions remaining, Government support was tapered from July 2021 and removed altogether by the end of September that year. Many travel businesses were left with no alternative but to rely on debt for a further six to eight months until operations restarted, with industry research finding that 68% of travel businesses took out a Government-backed loan during the COVID-19 crisis many of them small to medium sized businesses.
The Associations recognise that there is pressure on the public finances and that the Chancellor will be looking to both cut spending and raise revenue for the Treasury, but they say it is important the Government strikes the right balance to make sure that travel businesses can continue to recover and thrive, particularly given the travel industry’s annual contributions to the Exchequer and future growth potential.
New research from ABTA and UKinbound finds that £13.2bn is already paid to the Treasury in taxes every year from international travel, and that with the right policy framework inbound and outbound travel could outperform the average growth for the UK economy. The study shows inbound travel is forecast to grow 20% and outbound travel 15% by 2027, compared to 2019 levels, versus forecast growth of 10.3% in the wider UK economy over the same period.
However, the trade bodies argue that if the government chooses to remove support from travel businesses too soon, such as the withdrawal of business rates and energy bill support from April 2023, or adopts policies such as further increases in UK aviation taxes that will reduce customer demand, many travel companies, particularly smaller businesses, could see their recovery stall with many likely to struggle to pay bills and meet loan repayments.
ABTA and UKinbound’s five-point plan for supporting the travel industry’s recovery and harnessing growth:
- Freeze Air Passenger Duty for the remainder of the current parliamentary term
- Extend energy and business rate support for travel businesses beyond March 2023
- Work with the British Business Bank to encourage lenders to adopt a sympathetic view to travel businesses requiring more time to repay pandemic-related debts
- Reinstate the VAT reclaim scheme to make the UK a global shopping destination, boosting arrivals and tourist spending in the UK economy
- Create a fully digitalised youth group visa application process to reverse the decline in youth group travel that has resulted from the end of EU ID card acceptance within the UK
Mark Tanzer, Chief Executive of ABTA – The Travel Association said, “The Autumn Statement will be a pivotal moment for the UK’s international travel industry and will shape its future ability to grow over the next few years.
“We need the Chancellor to strike the right balance with the upcoming Statement. Getting the right tax and policy framework would see travel businesses continue to build on a decent summer, paving the way for strong recovery, which would support jobs, contributions to the Exchequer and the UK’s wider economic recovery. Get it wrong and we risk going backwards, facing similar challenges to those of the pandemic but made worse by the significant level of debt still outstanding.
“Our five-point plan offers a sensible and pragmatic way for the Government to support the industry in recognition of the valuable role international travel plays in the UK economy.”
Joss Croft, CEO, UKinbound added, “Speaking with a united voice makes the UK’s international tourism industry infinitely stronger.
“Inbound, outbound and domestic tourism businesses across the country continue to walk on a tightrope as they navigate recovery with rising costs and Covid-19 loan repayments, while striving to maintain high customer standards and service.
“The policy asks outlined by our two associations would bring a level of stability to businesses, and directly impact their ability to push forward with growth aims and objectives. The economic opportunities presented by tourism are clearly evident, but Government has to act now if it wants to capitalise on them and reap the benefits for the UK economy in 2023 and beyond.”
