United Kingdom at a
glance

 

Uncertainty around Brexit — the U.K.’s plan to operate outside the European Union after 2019 — is sparking reluctance among economic investors.

Businesses spent more than US$90 billion (£73 billion) traveling to, from and within the United Kingdom in 2017, according to BCD Travel analysis of Tourism Economics data. Domestic travel accounted for more than two-thirds, with the remainder evenly split between inbound and outbound international trips. Between 2015 and 2017, business travel spending grew between 5% and 8% per year. But expansion is expected to hit just 3% in 2018. Economists predict 3-4% annual growth through 2022, with domestic, inbound and outbound business travel spending increasing at similar rates.

Economic environment

Economic growth and business travel spending

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  • The U.K. was the world’s sixth-largest economy in 2017. A gross domestic product (GDP) estimated at US$2.565 trillion places it between France and India in the International Monetary Fund’s global rankings.
  • Economic growth hit just 1.8% in 2017, continuing a steady declined since growth hit 3.1% in 2014. In 2018, GDP is expected to expand 1.7% and could continue at that pace through 2019, according to Oxford Economics.
  • A stronger pound is driving an increase in household spending, but it also makes U.K. goods less competitive abroad. As a result, exports’ contribution to GDP growth is expected to decline.
  • Uncertainty surrounding Brexit — the U.K.’s plan to operate outside the European Union after 2019 — is causing reluctance among some investors.
  • A deal with the EU to maintain current trading arrangements until the end of 2020 is in the works. A Canada-style free-trade agreement seems the most likely long-term deal, but that would fall short of the U.K.’s desired outcome.

Air

International travel

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  • Travelers made more than 125 million international journeys to and from the U.K. in 2017. Britons traveling abroad accounted for 68% of these journeys.
  • International travel growth is expected to slow to just above 3% annually through 2022. That’s a drop from almost 5% growth per year from 2012 to 2017.
  • The U.S. is the U.K.’s largest inbound travel market, accounting for 10% of arrivals in 2017. It’s closely followed by France (9%), Germany and Ireland (each with 8%). These shares are expected to remain largely unchanged through 2022.
  • IAG (British Airways, Iberia, Aer Lingus and Vueling) is the largest operator in the London market. Across the capital’s five main airports, it accounts for 34% of departing flights. IAG operates at least half the flights from Heathrow and London City airports.
  • Low-cost carriers dominate at London’s other airports. EasyJet is the top carrier at Gatwick and Luton, while Ryanair leads at Stansted, with more than three-quarters of scheduled flights.
  • Brexit presents uncertainty for the all-important aviation industry in the United Kingdom. Negotiating tactics could have an impact on air service between the U.K. and Europe.

Accommodation

Hotel demand

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  • After years of declining hotel supply, more rooms began to come online starting in 2015. But the number of properties operating in 2016 was still 6% lower than in 2008, according to data from the U.K. Office for National Statistics’ Annual Business Survey.
  • Economy accommodation dominates chain offerings. Premier Inn and Travelodge lead the market with more than 1,300 properties between them.
  • Third-place IHG is the largest global chain in the U.K. While it offers upscale, upper upscale and luxury accommodation, most properties are rated upper midscale, where IHG is well represented by its Holiday Inn and Holiday Express brands.
  • Over the last five years, demand for hotel accommodation from domestic travelers remained flat, while international room nights increased 35%.
  • The rise in value of the pound means overseas travelers are now getting less for their money, which could make the U.K. a less attractive destination.


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