Size of the UK tourism industry
The UK’s tourism industry is made up of a variety of different kinds of enterprises, including: accommodation services for visitors, exhibitions and conferences, food and beverage-serving activities, passenger transport, transport equipment rental, travel agencies, cultural activities, and sport and recreational activities.
In 2018 (the most recent year for which full figures are available from the Office for National Statistics (ONS)), tourism industries contributed £127.5 billion to the UK’s economy (gross value added or GVA). This equated to 6.7% of all GVA added in the UK in 2018. 3.9 million people were employed in tourism industries in 2018. For the same year, the ONS calculated that the tourism direct gross value added (TDGVA) for 2018 was £71.7 billion. The ONS also calculated that ‘tourism direct employment’ for 2018 was 1.7 million. These figures are lower because they are worked out by applying a ‘tourism ratio’.
When considering the size of the tourism industry, economists calculate figures that take into account that businesses may provide services to both tourists and non-tourists. They therefore calculate the ‘tourism ratio’ of an industry, in other words the proportion of the economic activity in that industry that is directly attributable to tourism. A methodology for doing this is set out in the recommended methodological framework produced by the United Nations World Tourism Organisation, the Organisation for Economic Cooperation and Development and Eurostat. It includes using information from producers and suppliers (information on their categories of customers and their corresponding market share) and from visitors themselves (sample surveys of expenditure by product and indication of providers).
The UK Tourism Satellite Account, produced by the ONS each year, includes figures calculated by applying tourism ratios. For 2018, for instance, the ONS calculated that the tourism ratio for accommodation services was 75.5%, for food and beverage-serving activities it was 21.2%, for travel agencies it was 51.9%, and for exhibitions and conferences it was 0.9%.
Some within the tourism industry argue that figures based on the tourism ratio underestimate the sector’s contribution to the economy. The Tourism Alliance has expressed “considerable concern regarding the methodology behind ONS’s Tourism Satellite Accounts”. It argues that:
The methodology relies on visitors understanding what constitutes tourism-related travel and accurately remembering how much they spent on various products and services. This produces considerable inaccuracies such as only 75% of GVA and employment in the tourism accommodation sector being attributed to tourism in the 2018 Tourism Satellite Accounts.
Impact of the coronavirus pandemic
The tourism industry has been affected during 2020 and 2021 by measures introduced to combat the spread of Covid-19, such as restrictions on travel, on leaving home for non-essential reasons and on gathering, and the mandatory closure of certain types of businesses and premises. The ONS estimated that overseas residents made 73% fewer visits to the UK and spent 78% less on their visits in 2020 than in 2019. These figures are indicative, based on administrative sources and modelling. The International Passenger Survey, the data source on which travel and tourism statistics are usually based, was suspended in 2020 because of the pandemic. The ONS attributed this fall in visitor numbers and spending to the pandemic, with travel restrictions and reluctance to travel becoming widespread.
It is not only inbound overseas visitors who contribute to the UK tourism industry. The sector also relies on domestic tourism within the UK, and UK residents travelling abroad (for example using UK airports and travel agencies). The ONS estimated that UK residents’ visits abroad fell by 74% in 2020 compared to 2019. In terms of domestic tourism, Visit Britain’s surveys of domestic overnight tourism and day visits within Great Britain were suspended in 2020 and data from April 2021 is not expected to be published until the third quarter of the year. Visit Britain has forecast an estimate that domestic tourism spending in 2020 will have fallen by 63% compared to 2019.
Data from a variety of sources paints a picture of the impact on the tourism sector as a whole. Tourism direct gross value added (the measure of tourism’s direct contribution to the economy) fell by 64% between 2019 and 2020, according to estimates by Oxford Economics. This is estimated to have led to a 1.5% fall in UK gross domestic product. The tourism sector has been harder hit than many other parts of the economy. For instance, the Department for Digital, Culture, Media and Sport (DCMS) noted that:
Tourism-facing sectors were amongst the hardest hit across the economy—nine out of the ten service sectors that contracted the most in economic terms over 2020 were tourism-facing—for example, there was an 87% decline in economic output from tour operators, and an 80% decline in accommodation stays. […]
Falling demand has severely affected sector supply, the majority of which is made up of small and medium sized businesses. As of 18 April 2021, over a third (35%) of tourism businesses have seen their turnover fall by 50% or more, the highest of any economic sector (average 9% who have experienced this). The decline in cash flow has led to a worsening of firms’ financial health, with the latest ONS business survey stating that only 30% of accommodation and food services firms have confidence that they will meet their debt obligations, compared to 43% of firms in the wider economy.
Employment was also hit harder in the travel and tourism industries than in the wider economy in 2020. Total employment fell in the second and third quarters of 2020 compared to the same quarters in 2019, but this was driven by the fall in employment in the travel and tourism sector. Total employment in other sectors of the economy was higher in the second and third quarters of 2020 than in the same period in 2019. The ONS noted that as well as seeing larger declines in employment relative to other industries, the travel and tourism industries have tended to have higher rates of people on full or partial furlough. In June 2020, within businesses that had not permanently stopped trading, 63.6% of the travel and tourism workforce was on full or partial furlough, compared with only 23.6% of the total workforce in other sectors of the economy. By October 2020, following the easing of restrictions over the summer, the percentage of the travel and tourism workforce (in businesses that had not permanently stopped trading) on full or partial furlough had fallen to 18%, but this was still higher than in other sectors of the economy, where only 5.7% were furloughed. By January 2021, the proportion of the workforce on furlough had risen again, but the increase was much steeper in the travel and tourism sector: 44.5% of the workforce was on full or partial furlough, compared to 12.2% in the rest of the economy.
Prospects for recovery
Visit Britain published forecasts for inbound tourism to the UK and domestic tourism within Great Britain in May 2021. Its central inbound scenario forecast there will be 11.3 million inbound visits, up 2% on 2020 but only 28% of the 2019 level; and £6.2 billion to be spent by inbound tourists, the same as 2020 but only 22% of the 2019 level. This was a slight downgrade on the previous forecast, produced in January 2021. Visit Britain concluded that “inbound tourism is still likely to remain well below normal levels throughout the rest of the year and by the end of 2021 we do not expect inbound tourism to be back to, or even close to, normal levels”.
Visit Britain’s central domestic scenario forecast that domestic tourism spending would increase by 51% compared to 2020, but this would be only 56% of the level of spending seen in 2019. Again, this represented a downgrade on the forecast produced in January 2021. The forecast assumed “a step change in mid-May as restrictions ease and confidence returns, followed by a gradual recovery through the rest of the year and beyond”. Visit Britain did not expect an immediate return to pre-Covid levels of spending in any domestic tourism journey purpose or activity type. It suggested there could be “different recovery rates in different areas; some could see a strong summer while others remain below baseline levels for much longer”.
Visit Britain identified a number of factors that will impact on the sector’s recovery: the likelihood of travel restrictions persisting; progression of vaccinations and new variants in both the UK and other inbound markets; the economic situation in other countries hitting demand for travel to the UK; new behavioural habits affecting leisure and business travel; and potential loss of supply.
Government action to support tourism
The Government calculates it has provided at least £25 billion in Covid-related economic support to the tourism, hospitality and leisure sectors since March 2020, including:
- £12 billion from the coronavirus job retention (furlough) scheme;
- £5 billion from bounceback loans; and
- £2.5 billion from the temporary cut in VAT for hospitality, accommodation and attractions. The rate has been reduced from 20% to 5% from 15 July 2020 to 30 September 2021, then a rate of 12.5% will apply until March 2022.
Other government support measures to the sector have included:
- The Eat Out to Help Out scheme;
- A £10 million Kick-Starting Tourism package (July 2020) that was made available to support communities that depend on tourism.
- Grants, repayable finance and capital investment provided to national cultural institutions and organisations and heritage sites through the Culture Recovery Fund; and
- £1.3 million of funding between April and June 2020 to destination management organisations at severe risk of closure. Destination management organisations are bodies that manage and develop tourism in a local area, coordinating with tourism businesses and local authorities.
The Government published its Tourism Recovery Plan on 11 June 2021. The plan set out the role the Government intends to play in assisting and accelerating the tourism sector’s recovery from Covid-19, and a framework for how it will work with the sector. The Government has summarised its aims for the plan as follows:
- Recover domestic overnight trip volume and spend to 2019 levels by the end of 2022, and inbound visitor numbers and spend by the end of 2023—both at least a year faster than independent forecasts predict.
- Ensure that the sector’s recovery benefits every nation and region, with visitors staying longer, growing accommodation occupancy rates in the off-season and high levels of investment in tourism products and transport infrastructure.
- Build back better with a more innovative and resilient industry, maximising the potential for technology and data to enhance the visitor experience and employing more UK nationals in year-round quality jobs.
- Ensure the tourism sector contributes to the enhancement and conservation of the country’s cultural, natural and historic heritage, minimises damage to the environment and is inclusive and accessible to all.
- Return the UK swiftly to its pre-pandemic position as a leading European destination for hosting business events.
As part of the plan, the Government intends to launch a new rail pass to make it easier for domestic tourists to travel around the country, and a £10 million voucher scheme through the National Lottery, giving players the chance to claim vouchers to redeem at tourist attractions across the UK between September 2021 and March 2022, to encourage trips beyond the peak summer season. The Government will also explore how tourism data collected at the border could support the sector by tracking consumer travel trends. The Government will also launch a consultation on the introduction of a tourist accommodation registration scheme in England. This will consider the benefits of the rise of short-term holiday rentals in attracting tourists to destinations across the country and contributing to the English tourism economy, as well as its impact on local economies and communities.
The Government had already commissioned an independent review of destination management organisations in March 2021. The review is looking at their structure, funding and performance in England, and will consider whether there may be a better model for supporting English tourism at the regional level. It is due to report later this summer.
The Tourism Recovery Plan was welcomed by representatives from Visit Britain, UK Hospitality, the Events Industry Board, Airbnb and Hilton. However, the plan does not contain all the measures that some in the tourism industry have been calling for. For instance, shortly before the plan was published, the trade association UKinbound was lobbying for: an extension to the furlough scheme for at least six months beyond September 2021; an extension of the full business rates relief for leisure and hospitality businesses for at least six months beyond June 2021; an expansion of countries on the ‘green list’ for travel to the UK; and the removal of Covid-19 testing requirements for fully vaccinated travellers arriving in the UK. Labour has also been critical about the timing of the plan. Speaking the day before its publication, Alex Sobel, the shadow tourism minister, said “even if the Government publish the tourism recovery plan this week, it is still too late for the spring season and we are playing catch-up”.
- House of Commons Library, Support for the Aviation, Travel and Tourism Industries, 9 June 2021
- Debate on ‘Aviation, Travel and Tourism Industries’, HC Hansard, 10 June 2021, cols 1174–1209
- Office for National Statistics, ‘Coronavirus and the impact on the UK travel and tourism industry’, 15 February 2021
- Oxford Economics, UK Tourism Scenario Forecasts, dated March 2021, made available by the DCMS on 11 June 2021
Cover image by Belinda Fewings on Unsplash.
This briefing was updated on 17 June 2021 to provide further information about the methodology used by the ONS to produce figures on the economic contribution of the tourism industry.