The UK economy has had to weather multiple storms in recent
years, with; BREXIT, the COVID pandemic, war in Ukraine, rising inflation a lack of real growth from the 2008 recession. The economy grew at its slowest pace since the 2008 financial crisis in the closing months of 2019, ending a year in which Brexit uncertainty dampened business investment even as a strong labour market underpinned consumer spending. At the start of 2020 there was little prospect of a lasting improvement, according to the Financial Times’ annual survey of UK economic growth.
Across all UK industries in the Business Insights and Conditions Survey found in March 2021 that many businesses had paused trading due to the pandemic however 75% of businesses had been trading for more than the last two weeks of March. This is a slight improvement from the 71% in January. Other key facts from the survey included that 5% of businesses had paused trading but intend to restart in the next two weeks and that 3% of businesses had permanently ceased trading
Any growth through 2021 into 2022, was forecast to be driven initially by stronger household spending, and later by stronger government spending.
Since which the war in Ukraine has created rising energy and food prices, causing a rise in inflation that outstrips UK GDP.
In the UK, growth is expected to slow during the course of 2022 as the impact of the cost of living crisis due to food and energy price increases continues. Overall growth in the UK for 2022 could reach 3.9%, before slowing to 1.1% in 2023, according to the latest KPMG Global Economic Outlook.
Consumer spending is expected to be heavily affected by the squeeze on incomes, as household budgets come under unprecedented pressures from rising costs. Amongst these, energy prices remain the biggest single driver of rising inflation with the pre-announced increase this month which is expected to be followed by another 30% increase in October 2022.
Taken together, they could add more than two percentage points to inflation this year. In addition, the conflict in Ukraine is expected to lead to rising food prices as well as higher prices of some metals and other commodities. The combination of these pressures has seen most economic commentators predict that we could see inflation peak between 8-11%, this is anticipated to moderate back down to 2-4% in 2023.
As well as upward inflation, the economic outlook for growth is dampening, due to a reduction in consumer spending, we expect UK GDP growth to average between 2.8% – 3.8%, prior to 2022, the previous consensus GDP growth was predicted at 4.5% for the year. The main cause of this reduction is lower household consumption. Lower income households have a higher level of impact due to a contraction in real earnings that shows no signs of abating.
There are predictions of a possible recession in 2022-23, which fiscal policies may struggle to ease due to the low interest rates and quantitative easing used at the outfall of 2008 and large government spending during the COVID pandemic, this coupled with the higher costs forecast from the separation from the EU, leaves the country prone to an elongated recession due to an extraordinarily high UK general government gross debt was £2,223.0 billion at the end of March 2021, equivalent to 103.7% of gross domestic product (GDP).
UK GDP – Financial year ending March 1901 – March 2021
UK general government deficit (or net borrowing) was £327.6 billion in the financial year ending 2021, equivalent to 15.3% of GDP.
UK average house prices increased by 9.6% over the year to January 2022, down from 10.0% in December 2021.
The average UK house price was £274,000 in January 2022, which is £24,000 higher than this time last year. Average house prices increased over the year; in England to £292,000 (9.4%), in Wales to £206,000 (13.9%), in Scotland to £183,000 (10.8%) and in Northern Ireland to £159,000 (7.9%).
London continues to be the region with the lowest annual growth at 2.2%.
Slower growth is set to continue in 2022 if at all with rises of less than 1% predicted nationally prior to the Coronavirus outbreak.
In terms of location the south and eastern areas raise the national average values with Wales, and the North East displaying dampening conditions and the North West averaging out across the markets. Surprisingly the Midlands performed well for the year and London showed a stagnation in values.
The residential market is buoyant but dampened slightly; last year was one of relative growth, in part due to the stamp duty holiday by the government. The UK’s average house price now stands at £274,000. It has increased by 7.5% in the year to January 2021, down from 8.0% in the year to December 2020.
At the start of 2020, new home building had picked up with the number of new homes created in England at its highest level in almost 30 years, official figures show. There were 240,000 properties added to the country’s housing stock in 2018-19. This is an increase on the 217,000 homes built in 2018-19, which itself was up 20% on the year before. But that only brings the total back to levels seen before the financial crash, and a long way short of the 300,000-target set by the government.
The pandemic may have caused house buyers to reassess their housing preferences. The ONS UK House Price Index (HPI) data shows that the average price of detached properties increased by 8.6% in the year to January 2021, in comparison with flats and maisonettes, which increased by 2.6% over the same period.
Despite the bleak economic picture outlined above, the UK tourism economy has grown from strength to strength since 2008 and has seen several trends raising the level of service and accommodation, with lodges becoming the norm opposed to static caravans on parks and more water-based offerings, with house boats and floating lodges becoming more mainstream.
Visit Britain, a national tourism agency funded by the Department for Culture, Media and Sport have assessed the British revenue income and have concluded that currently Britain is ranked 11th in the world for visitor numbers and visitor spend this is a drop from 2018 where it was 8th in the world.
Despite this drop income has remained strong pointing towards a resilient inner UK tourism market driven by the increase in staycations. This was helped by the move out of coronavirus restrictions in 2021. The data is always 12 months delayed and official figures for 2021 are still being calculated due to COVID delays, despite 2020 visitor numbers being reduced, due to coronavirus, initial estimates are strong for holiday home sales and the 40.9 million overseas visitors who came to the UK in 2019 spent £28.4 billion. These figures represent a 1% increase in volume and 7% (nominal) increase in value compared with 2018. The UK accounted for 2.4% of international tourism receipts in 2018.
In 2018, the USA, France and Germany were the top three markets in terms of number of visits to the UK accounting for 27.7% of visits. The top three markets measured in terms of visitor spend were the USA, China and Germany accounting for 26.2% of all overseas visitor spend in the UK.
As well as overseas visitors, an increase in British holidaymakers remaining in the U.K. is predicted to continue. Aside from coronavirus the fallout from Brexit is increasing internal demand, as according to Travel Supermarket, a holiday in a Eurozone country will cost a family of four £245 more now than it would have done before Britain voted to leave the EU. It estimates that British holidaymakers will take an average of £513 spending money per person in 2016, or £2,052 per family of four.
In 2019, British residents took 99.1 million overnight trips in England, totalling 290 million nights away from home and expenditure of £19.4 billion, with an average trip length of 3 nights.
The number of domestic trips to England was +2% higher than in 2018. Having assessed the overnight trips just under half were for tourism, with 46.4 million holiday trips were taken in England in 2019. The number of holiday trips taken was 3% higher than in 2018. At 31.6 million, short breaks of 1-3 nights account for just over two-thirds of English holidays by volume. 14.8 million 4+ night holidays were taken.
Taking into account direct and indirect impacts (including aspects like the supply chain), tourism in England contributes £106 billion to the British economy (GDP) and supports 2.6 million jobs. Looking at direct impacts only, tourism still contributes £48 billion, supporting 1.4 million jobs. In 2011, there were 208,880 VAT registered businesses in England in tourism sectors, including accommodation, food and drink, transport, travel agencies, cultural activities and more. In 2021, this had risen to 303,000 businesses. This is nearly 12% of the UK total and an increase of 1.8% from the year before.
According to Visit Britain’s study of the available accommodation stock in England, they are: 33,374 serviced accommodation businesses (e.g bed and breakfasts, guest houses and hotels) with 786,775 bedrooms and 1,768,795 bed spaces. 31,845 non-serviced accommodation businesses (e.g holiday homes, camping and caravan parks) offering 1,401,716 bed spaces. An average serviced accommodation room occupancy of 71% in 2017, with average bed space occupancy at 52%. Visit Britain, believes that the tourism sector is predicted to grow at an annual rate of 3.8% through to 2025 – significantly faster than the overall UK economy (with a predicted annual rate of 3% per annum) and much faster than sectors such as manufacturing, construction and retail.
Britain will have a tourism industry worth over £257 billion by 2025 – just under 10% of UK GDP and supporting almost 3.8 million jobs, which is around 11% of the total UK number. Within the leisure park sector 73% of turnover is derived from capital sales, with an average margin of 62% on overall costs. The average pitch fee is circa £2,500 per annum, however this can be as much as £4,000 to £6,000 depending on the quality and availability of facilities.