Tourism’s darkest hour
The pandemic has made the world a much smaller place. Few sectors have been as badly hurt as tourism and international travel.
The impact on London, one of the world’s great entrepot cities, is underlined by the sobering letter from UK hospitality to the Prime Minister and the almost invisible mayor, Sadiq Khan.
It is loss of tourism, not just emptied offices, which is threatening a ‘downward economic spiral’. Pre-Covid, some 40m visitors came to Britain, spending £30bn, with around 55pc of them spending time in the capital. Spending this year is down 79pc to just £6bn.
even the Bank of england governor Andrew Bailey, who has been optimistic about recovery, warns that ‘social spending’ on restaurants and theatres could take longer to recover.
What is going on in the UK is frightening enough but it is a global phenomenon.
A report just released by the United Nations’ trade arm UNCTAD shows that if the closure of air routes and tourism were to last eight months then the output loss to the world economy would be £1.65 trillion, or 2.8pc of the total.
The scarring already stretches beyond the hospitality industries with major airlines staring into the abyss. Virgin Atlantic has just been saved after a £1.2bn deal with creditors supported by Richard Branson. even rich state-flag carrier Qatar Airways is delaying orders of new aircraft, clogging up aerospace supply lines.
UNCTAD argues that the tourism crisis offers opportunities for fundamental change, including digital transformation and more carbon-neutral travel. But nothing will be more important than a co-ordinated effort to ease and lift current travel restrictions. The constant chopping and changing by the Foreign Office is a travel nightmare.
A rigorous test and trace system at UK airports, taking advantage of the data management of airline booking systems, should have been in place months ago. Instead, livelihoods and output in the UK’s services dominated economy are at serious risk.
Good housekeeping
OF ALL the measures Chancellor Rishi Sunak put in place in the summer, the decision to support housing with a temporary cut in stamp duty may prove the most effective.
even though the number of UK renters has more than doubled in the last two decades to an estimated 4.6m, home ownership and your own space is still an aspiration for people in Britain. Data from Nationwide shows house prices rose at their speediest rate in 16 years in August, illustrating that in spite of furlough and unemployment Sunak has uncorked a bottle. The combination of pentup demand from lockdown, cheap mortgage deals and a big tax break on houses under £500,000 has done the trick.
The impact of rising demand for homes on the broader economy should not be underestimated. The increase in the average house price to £224,100 will not be helpful to younger citizens taking the first step on the housing ladder. They also are suffering from a tightening of lending terms requiring bigger deposits and discouragement of the bank of Mum and Dad.
houses are the biggest purchase in most people’s lifetime, and when the price of your home goes up, people feel more confident and it unlocks a willingness to spend the so called ‘wealth effect’. Similarly, when people buy a new home it doesn’t stop there. What follows are decorations, new appliances, soft furnishings and much else.
Results from housebuilder Barratt Developments give insight into why the bubbling up of prices may eventually ease. Barratt disclosed a 30pc drop in housing completions and revenues due to the pandemic.
Replicated across the home construction industry, this represents a big supply shock pushing up the price of existing homes.
Chief executive David Thomas sounded upbeat about prospects in the light of eased planning regulations. Barratt shares shot up but the decision to leave the dividend suspended suggests jitters remain.
Missing magic
LegO has come through the pandemic with flying colours with revenues and profits sharply up in the first half of the year.
The plastic brick maker continues to capture the zeitgeist through alliances with gaming group Nintendo, digital-related bricks and learning through play. how disappointing that when Merlin, operator of the Legoland franchise, was struggling for funding at the height of Covid-19, the billionaire Kristiansen family behind Lego (part of a £6bn buyout consortium) did not rush in. Scared of stepping on the bricks...