Transport and the economy

Memorandum from VisitBritain (TE 26)

Introduction

1. VisitBritain is responsible for promoting Britain overseas. It works in partnership with the tourist boards in England, Scotland, Wales, Northern Ireland and London to ensure that the UK is marketed around the world in mature and developing markets, providing an export platform for the industry. Tourism, like domestic transport, is a devolved matter.

2. Our mission is to build the value of inbound tourism to Britain by inspiring visitors from overseas to explore Britain, delivering a global overseas network to support tourism promotion in mature and developing markets, championing tourism and engaging industry and Government in support of its growth and maximising the long-term tourism benefits of the London 2012 Olympic and Paralympic Games.

· Our activity contributes £1.1 billion to the economy and delivers £150 million directly to the Treasury in tax take each year;

· This translates into supporting 28,000 jobs across Britain;

· VisitBritain delivers £159 million in efficiency benefits to the tourism industry through its role, strategy and innovations.

Summary of response

3. Tourism is a major part of the UK economy. It is Britain’s third highest export earner, generating £115 billion a year and providing employment for 2.6 million people, as well as supporting over 200,000 small and medium sized businesses. Altogether this amounts to nearly 10% of the entire economy.

4. Promoting the growth of tourism is a priority for the new Government. In his speech on 12 August, the Prime Minister set out his ambitions for the tourism industry. These include returning Britain to the top five destinations for tourists globally, as well as increasing Britain’s share of tourism from emerging markets such as India and China. A half a percent increase in market share would yield an additional £2.5 billion for the economy and create 50,000 new jobs.

5. In his speech the Prime Minister recognised that action was necessary across Government. He singled out infrastructure as one such area. A successful transport system is central to the achievement of the Government’s aims for the tourism industry to be a successful, growing part of the UK economy. The cost of visiting the UK, the capacity and quality of ‘welcome’ at our international gateways, and the quality of our national transport infrastructure are vital to ensuring the success of tourism, and thus maximising its contribution to the UK economy.

6. In particular, the UK’s international route network is a key asset for the development of tourism. International aviation is vital, as is improving the quality of the UK's 'welcome'. Immigration controls at ports of entry remain a bottleneck. London is the main destination for visitors to the UK, attracting 50% of all visitors to the country. A strong domestic transport network, which is easily navigable by international visitors and includes high speed rail in the future, will encourage visitors to travel elsewhere in the country, spreading the economic benefits of tourism.

The economic value of tourism to the UK

7. Tourism is one of the largest industries in the UK. According to a recent Deloitte study The Economic Contribution of the Visitor Economy – UK and the nations (2010), tourism was worth £115.4bn to the UK economy in 2009 once the direct and indirect impacts are taken into account, equivalent to 8.9% of UK Gross Domestic Product. (Full report available online: The Economic Contribution of the Visitor Economy Deloitte June 2010)

8. The Deloitte study found that tourism would account for a similar proportion of the overall UK economy in 2020 as it did in 2008 (8.8%). The number of jobs that tourism supports is forecast to increase by 250,000 between 2010 and 2020, from 2.645 million to 2.899 million. One in twelve jobs in the UK is currently either directly or indirectly supported by tourism.

9. Tourism is the UK’s third highest export earner behind Chemicals and Financial Services, with inbound visitors spending more than £16bn annually and contributing over £3bn to the Exchequer. Its future success can play a part in developing a strong, rebalanced economy.

10. The long-run GVA growth rate of the visitor economy is forecast to be 3.5% per annum over the period 2010 to 2020, given the right support. This is well ahead of the 2.9% forecast for the economy as a whole.

Transport and tourism

11. International transport is vital to delivering the economic benefits of tourism. The importance of air travel to the UK inbound visitor economy was evident during the disruption seen in April 2010 due to the cloud of volcanic ash from Iceland resulting in the closure of airspace. VisitBritain has assessed the cost to the tourism industry as £425 million. In 2009, International Passenger Survey (IPS) statistics show 74% of overseas visitors travelled to the UK by air, 15% by sea, and 11% by Tunnel.

12. CAA figures reveal the number of nations with direct scheduled air links to Britain in 2009 stood at 119. There are 1,435 separate scheduled air routes operating from overseas to the UK. This makes Britain one of the best internationally connected nations of its size in the world. This connectivity is a vital asset for our tourism industry’s future growth.

13. The UK’s five largest markets in 2008 (France, Ireland, the USA, Germany and Spain) are forecast to remain the five largest in 2014, accounting for an additional 3.3 million visits between them. Faster growth is forecast from the USA (30%) and Germany (29%). France is expected to remain top of the ‘visits league’, growing by 12% itself. (Source: Tourism Economics 2010)

14. Visits from China to the UK are expected to grow at a faster rate than from any other source market (89%) by 2014, making it the UK’s 30th largest market, one place behind Brazil (which is expected to grow by 18%). (Source: Tourism Economics 2010)

15. Improvement of the UK’s domestic and international transport systems is vital if we are to achieve the sustainable growth of tourism which the Prime Minster has outlined, in order to extract the maximum benefits of tourism for the wider economy. In particular the cost of visiting the UK, immigration controls at ports of entry and capacity constraints all act as barriers to potential visitors.

Barriers to growth

Cost of visiting the UK

16. The cost of a UK visitor visa increased on 1st April 2010 from £67 to £68. This particularly affects key markets in China, India, Russia, Thailand, South Africa and the United Arab Emirates, and, depending on prevailing exchange rates, can represent a value for money challenge in comparison with a visa to explore the Schengen bloc, priced at €60 (£50).

17. Visitors from key growth markets- particular Russia, India, and China (BRIC nations) are likely to want to visit a number of European nations as part of a tour. The ability to access 25 nations within the Schengen bloc, rather than just the UK, combined with a higher cost, places Britain at a disadvantage when competing for a share of these new markets. A European-extension visa which provided a simpler process for visitors already applying for a Schengen visa to acquire one to travel to the UK, at reduced cost, would benefit our tourism and transport industries.

18. Visa costs are in addition to already high taxes on aviation. The last three years have seen a succession of increases in the rate of APD - passengers flying to the UK from a long-haul destination will have to pay up to £170 in tax from 1 November 2010, compared to a maximum of £80 just four years ago. At present no other country enforces an aviation tax at a comparable rate, which places the UK at a significant competitive disadvantage when trying to encourage overseas visitors.

19. Aviation is not an under taxed activity. Excluding APD, aviation’s tax to Gross Value Added (GVA) ratio was 32.5% in 2007/8, slightly higher than the economy average 32.1%. With APD included the ratio rises to 54.5%. UK aviation already covers its environmental costs. The tax burden on aviation is £0.6 billion higher than the external costs as assessed by DfT. The tax burden will exceed these costs by up to £1.1 billion in 2012 following the entry of aviation to the EU Emissions Trading Scheme (Oxera Consulting Ltd. 2009).

20. As just one example, at present it costs a family of four at least £412 more to travel from China to London than China to Paris or Frankfurt (see table below). France received 688,000 Chinese visitors in 2008, while the UK managed only 108,000.

Table 1: Cost of visiting the UK for a family of four, compared with Paris and Frankfurt

*Chinese translation available but form must be completed in French or English

21. The relatively high cost of visiting the UK is a barrier to tourism. The expense of a trip to Britain is frequently mentioned by both visitors and prospective visitors. Whilst this perception has largely been shaped by the strength of the pound (2003 - 2007) relative to other key international currencies, consumers also talk about the expense of getting to Britain. Reducing the cost of travelling to the UK, compared to our competitors, would stimulate international tourism, increasing the number of visitors and delivering increased economic benefits. This would require reductions in the cost of visas and Air Passenger Duty.

Immigration controls at ports of entry

22. In research carried out for VisitBritain on departing visitors by the CAA in 2008, airports were mentioned most frequently as the place where visitors felt least welcome. Immigration was also specified, but less frequently. Passenger perceptions of have been improving: 94% of passengers at Heathrow now rate their journey as good, very good or excellent.

23. VisitBritain is working with a wide range of stakeholders on the ‘Welcome to Britain’ initiative, including the UK’s major ports and airports, in preparation for these major events, in particular the 2012 Games. This will be a major opportunity to showcase Britain at its very best and the Welcome we offer our visitors will be a crucial measure of the success of the Games, both in London and Britain as a whole. 2012 offers an unparalleled opportunity to act as a catalyst for accelerating improvements in the quality, services and welcome in Britain as a lasting legacy and a firm foundation for future tourism growth.

24. VisitBritain does have concerns about the welcome passengers receive at UK immigration. The UK Border Agency (UKBA) sets out a standard queue time for non-EU passengers of 45 minutes. This issue has been picked up by the Department for Transport’s South-East Airports Taskforce. This level of basic service is poor, and harms visitors’ perceptions of Britain as a tourist destination. Providing a good passenger experience should be integral to UKBA’s work, along with maintaining a secure border.

25. Action across Government departments is necessary if we are to ensure that UK immigration is able to cope with, and provide a welcoming service, to the influx of visitors expected for the 2012 Olympic Games and beyond. Investment in improved immigration controls which facilitate the fast, convenient movement of travellers into the UK will improve the quality or service at, and perception of the UK’s major points of entry, and generate a tourism dividend.

Capacity

26. In 2009 74% of the 29.9 million overseas residents who visited the UK travelled by air, and with a much higher average spend per visit than those using either the Channel Tunnel or a ferry, airborne visitors accounted for 83% of the £16.6bn worth of inbound visitor spend last year. Air travel is vital to the economic contribution of tourism.

27. For long-haul visitors the main entry point to a country will be through a hub airport. For the UK this is Heathrow. The chart below shows the annual number of aircraft arriving at Heathrow, which has dipped by almost 4,000 in the past few years, but remains on a par with the likes of Paris Charles de Gaulle, Frankfurt and New York JFK.

28. Recently published figures from the United Nations World Tourism Organisation revealed that countries such as Malaysia and Turkey are gaining ground on the UK in terms of visitor arrivals and international tourism earnings. The UK is also falling behind in terms of seat capacity from India and China.

29. Whilst the UK is the fourth best-served destination from India, the number of seats available on direct flights between the UK and India is only a third that available on flights to the United Arab Emirates. The UK is in 19th place for seat capacity from China.

30. India, China and other emerging economies offer substantial opportunities for growth as business and tourism links mature. Visits from China are expected to grow by 89% by 2014. Increasing the UK’s share of the Chinese tourism market by half a percent would yield an additional £2.5 billion for the economy and create 50,000 new jobs. The economic case for tourism growth is clear.

31. Achieving this level of growth is dependent on the provision of sufficient airport capacity in the long term. The cost of travelling to the UK is already high due to Air Passenger Duty, and visa costs. A shortfall in airport capacity would inflate costs further, harming the UK’s competitiveness. The Committee on Climate Change, reporting in December 2009, found that growth in airport capacity by 60% to 2050 was consistent with the UK’s climate change targets.

Domestic transport and spreading the benefits of the visitor economy

32. Transport is essential to ensuring that the economic benefits of tourism can be shared across the UK. VisitBritain research over a long period has found that perceptions of Britain are dominated by London. The capital receives 50% of overseas visitors, compared to 9% in Scotland and 4% in Wales.

33. In absolute terms, London had 11 times the number of the visitors to Edinburgh, 18 times the number to Manchester, 20 times the number to Birmingham and 23 times the number to Glasgow. Enhancing our domestic transport system in order to make it more easily accessible to overseas visitors could play an important part in increasing the number of visits to areas other than London.

Intermodality

34. Major ports of entry must be integrated into the domestic transport network, thereby establishing intermodal hubs where travellers can change from one mode of transport to another. This would enable passengers to make intelligent decisions when planning domestic and international journeys, informed by a market for air, sea, road and rail journeys which would reflect their environmental cost and convenience.

35. There is a clear need for a joined up approach amongst transport operators to timetabling, ticketing arrangements and information provision. For example: Caledonian MacBrayne ferries already include train departure and arrival times from / to Glasgow. There are, however, mismatches in the timetabling. The 1221 train from Glasgow Queen St. arrives at Oban at 1527. Passengers require a minimum 30 minutes to check in for a ferry. The ferry to Barra sails at 1540- only 13 minutes after the train arrives. There is a potential coordinating role for Government. Further, domestic transport networks need to identify and take into account the transport needs of tourists.

36. Equally, it is important to make it simple for overseas visitors to move conveniently between modes of transport in order to ease their journey. VisitBritain already works with Transport for London, and other organisations, to sell items such as Oyster Cards, and tickets for the Heathrow Express, Gatwick Express and Stansted Express trains, though the VisitBritain online shop. This allows overseas visitors to plan and prepare for their journeys on arrival in the UK in a convenient way.

37. More generally, travel around the UK for overseas visitors, particularly those who do not speak much English, can be challenging, and expensive as they are often unable to book in advance to take advantage of better deals for rail travel. This can act as a further disincentive for visitors to travel beyond London and the Greater South East.

38. The BritRail pass, which is available only to non-UK residents, has been created in order to allow tourists to access lower-priced rail travel and encourage them to visit parts of the country they would not otherwise go to. Through-ticketing which allows overseas travellers to plan travel in the UK once they arrive at an international gateway has the potential to significantly increase the regions’ share of overseas visitors, with the result that the economic benefits of tourism would both grow and be more broadly-based.

High speed rail, but an ongoing role for domestic air

39. VisitBritain supports proposals for a high speed rail network linking London with cities in the north of the UK, which will encourage visitors to travel beyond the Greater South East, broadening the economic contribution of tourism to the whole of the UK.

40. High speed rail is complementary to aviation. It is not an alternative. HSR cannot replace short haul and domestic air journeys. Airports can, broadly speaking, be connected to any other airport on earth by the establishment of an air route. Rail depends on geographically fixed infrastructure- a track- which cannot necessarily link any two points in the UK, particularly where there is a major sea crossing involved. In 2008 more than 530,000 passengers flew between London Gatwick and Belfast’s two airports. A further 780,000 made the journey between Belfast and Heathrow. 17,000 people flew between Aberdeen and Exeter (CAA 2009).

Conclusions

41. Tourism is a major part of the UK economy. It is Britain’s third highest export earner, generating £115 billion pounds a year and providing employment for 2.6 million people, as well as supporting over 200,000 small and medium sized businesses. Altogether this amounts to nearly 10% of the entire economy.

42. Tourism has the potential to grow, and increase its contribution to a rebalanced UK economy. The long-run GVA growth rate of the visitor economy is forecast to be 3.5% per annum over the period 2010 to 2020, given the right support. This support includes ensuring that the UK’s international and domestic transport networks are able to meet the demands placed on them.

43. Improvement of the UK’s domestic and international transport systems is vital if we are to achieve the sustainable growth of tourism which the Prime Minster has outlined, in order to extract the maximum benefits of tourism for the wider economy. In particular the cost of visiting the UK, immigration controls at ports of entry and capacity constraints all act as barriers to potential visitors.

44. The relatively high cost of visiting the UK is a barrier to tourism. Reducing the cost of travelling to the UK, compared to our competitors, would stimulate international tourism, increasing the number of visitors and delivering increased economic benefits. This would require reductions in the cost of visas and Air Passenger Duty.

45. Action across Government departments is necessary if we are to ensure that UK immigration is able to cope with, and provide a welcoming service, to the influx of visitors expected for the 2012 Olympic Games and beyond. Investment in improved immigration controls which facilitate the fast, convenient movement of travellers into the UK will improve the quality or service at, and perception of, the UK’s major points of entry, and generate a tourism dividend.

46. Achieving this tourism growth is in part dependent on the provision of sufficient airport capacity in the long term. The Committee on Climate Change, reporting in December 2009, found that growth in airport capacity by 60% to 2050 was consistent with the UK’s climate change targets.

47. Effective domestic transport networks are vital to ensuring that visitors to Britain are able, once they arrive, to travel beyond the Greater South East and enjoy the tourism opportunities the rest of the UK has to offer. In so doing, they will spread the economic benefits of tourism, stimulating job and wealth creation across the country, supporting the wider economy.

48. Major ports of entry must be integrated into the domestic transport network, thereby establishing intermodal hubs where travellers can change from one mode of transport to another. Equally, it is important to make it simple for overseas visitors to move conveniently between modes of transport in order to ease their journey.

49. VisitBritain supports proposals for a high speed rail network linking London with cities in the north of the UK, which will encourage visitors to travel beyond the Greater South East, broadening the economic contribution of tourism to the whole of the UK. High speed rail is complementary with, not an alternative to, domestic aviation.

September 2010