Tourism is a fast-growing and dynamic constituent of the economy sector in the United Kingdom. Tourism is assimilated into the economic system in such a way that it has considerable direct and indirect impact to the overall performance of the economy. The United Kingdom is a favorite destination for many domestic and international tourists, because of its geographical endowment, heritage, sporting activities and art creations. The United Kingdom is ranked sixth in the world by visitor numbers (Office for National Statistics, 2012). In terms of visitor expenditure the United Kingdom is ranked seventh in the world (Surugiu, 2009).
According to the most recent statistics from the World Travel and Tourism Council (WTTC), tourism accounts for 10% of the world’s GDP and employs 9% of the world’s working population (WTTC, 2013). In the United Kingdom, the major tourist attractions include the London eye, the British Museum, Tate Modern, National Gallery, Buckingham palace, Stonehenge and river Thames among others. The tower of London is the most visited tourist attraction in the United Kingdom. Domestic tourism is the largest tourism income earner in the United Kingdom. The total spending of the domestic tourists in 2012 was 21,881 million UK pounds (WTTC, 2013). Currently, the United Kingdom tourism industry is worth 127 billion UK pounds. This accounts for approximately 10% of the UK economy (WTTC, 2013). The tourism industry is currently the fastest growing economic sector since the 2007 economic recession (Office for National Statistics, 2012).
The impact of tourism to the economy of the United Kingdom can be analyzed in two perspectives. The first perspective is the direct impact to the economy. The direct impact to the economy results from the contribution of the primary businesses associated with the tourism industry. These include the lodging businesses, restaurants, transportation, amusements and tourist targeted retail trade. These sectors have a direct impact to the economy in the form of employment opportunities, sales revenue and tax revenues. They directly contribute to the total GDP of the United Kingdom. Tourism sectors are also the greatest source of foreign currency exchange. According to data from the Visit Britain website, the tourism industry contributes more foreign exchange than the crude oil export industry (Deloitte, 2013).
The second perspective to the impact of the tourism industry to the economy of the United Kingdom is the indirect impact. This results from the amplification of the direct impact on the economy. The directly involved businesses use the sales revenue earned on tourist activities to purchase supplies from other businesses that may not be related to the tourism industry directly (Daniel, 2011). For instance, a restaurant uses the revenue earned from the tourists to purchase agricultural produce from the farmers. The agricultural industry is not directly related to the tourism industry. This is known as the multiplier effect (Surugiu, 2009). The multiplier effect is can be compared to the domino effect where the success in one sector is transferred to all other sectors in the economy. The overall effect is the exponential growth of the economy (Office for National Statistics, 2012).
The tourism industry in the UK impacts the economy through the provision of direct employment to many people in the United Kingdom. According to The Tourism Alliance statistics, the tourism industry is the third largest employer in the United Kingdom (The Tourism Alliance, 2012). According to the WTTC, the total contribution of tourism in the UK to employment was 2.42 million jobs in 2012(WTTC, 2013). This is approximately 8% of the total employment. This figure rose in 2013 to 2,447,500 jobs in 2013. This shows that employment from tourism rose by 1.1%. The WTTC model forecasts that by 2023 the tourism industry in the United Kingdom will support approximately 3.076 million jobs. This is a projected increase in job opportunities of 2.3% per year (WTTC, 2013).
The employment in the tourism industry is spread over many sectors. These include accommodation services for visitors, food and beverage serving services, railway passenger transport services, road passenger transport services, water passenger transport services, air passenger transport services, transport equipment rental services, travel agencies & other reservation services, cultural activities, sport and recreation activities, exhibitions & Conferences and tour guide services. Among these tourist-related industries, the biggest employer is the food and beverage servicing industry (Office for National Statistics, 2012). Analysis provided also shows that in 2013, for every 50,000 to 54,000 UK pounds spent in tourism, there is the creation of one job (Deloitte, 2013).
The tourism industry in the United Kingdom also impacts economic growth in a large way by being a major incubation platform for entrepreneurs. According to statistics by the universal tourism alliance of the United Kingdom, over 21,000 new start-ups in the tourism sector were established in 2009 (The Tourism Alliance, 2012). This is a great achievement for an economy struggling back to its feet after the economic downturn in 2007. With the establishment of the new startups, there are new jobs created by each start-up. Statistics show that over 80% of these startups employ at least 10 employees. This means that in the year 2009, there were over 210,000 new jobs created (The Tourism Alliance, 2012).
The tourism industry also provides a source of employment to a large number of people who cannot be engaged in full-time jobs. This includes a large number of school leavers and people lacking professional qualifications to work in the respective industries. Such people find employment as waiters in the restaurants or in the transport sector among others. According to statistics, 44% of people employed in the tourism sector are under the age 30 (The Tourism Alliance, 2012). In addition to this, 80% of those working in the tourism industry are British (Deloitte, 2013). This shows that the tourism industry is a significant source of employment to the local people.
The tourism industry in the United Kingdom has a great impact on its economy through tourism export earnings (Surugiu, 2009). Export earnings can be defined as the expenditure incurred by the international tourists who visit the United Kingdom. The tourists spend their money on goods and services when in the United Kingdom. This includes all the finances spent on transportation to the United Kingdom and within the United Kingdom, food and beverage cost in restaurants, entry fees to sites of attraction, accommodation fees and the money used in retail purchases. These earnings contribute a significant portion of the GDP of the United Kingdom.
Currently, tourism is the sixth largest export earner in the United Kingdom. It comes after chemicals, financial services, manufactured goods, capital goods and transportation. According to statistics from a report compiled by Deloitte, the export earnings from the tourism industry in 2012 were a total of 22 billion UK pounds (Deloitte, 2013). This is only based on the spending of the international tourists since the expenditure on goods and services by the domestic tourists, who form the majority of the tourists, is not factored in when calculating the total export earnings (Office for National Statistics, 2012).
The tourism industry has a significant impact on the economy of the United Kingdom through tax revenues. The tourism industry is composed of many businesses providing diverse forms of goods and services to the tourists (Surugiu, 2009). These goods and services are subject to a myriad of tax forms. The businesses that supply these services to the tourists are also subject to other forms of taxation (Daniel, 2011). These tax forms which the tourists and the business owners are subjected to include Value Added Tax (VAT), visa application fee, Air Passenger Duty (APD), Business corporation tax, employee income tax and taxes on sole traders and partnerships (Deloitte, 2013). In addition to the businesses and the international tourists, the employees who are directly employed in the tourism sector are also subject to taxation on their earnings in the form of income tax.
According to data from a report by the Deloitte Company the tax contribution from the tourism industry in the United Kingdom amounted to 6.7 billion UK pounds in 2012(Deloitte, 2013). One billion UK pounds were from Air Passenger Duty, three billion UK pounds from Value Added Tax, 0.2 billion UK pounds from visa fees, 0.3 billion UK pounds from business corporation tax and 2.2 billion UK pounds from income tax(Deloitte, 2013). The United Kingdom is one of the only four countries in the European Union that charges the full rate of value added tax on tourism accommodation and the second highest rate of VAT in Europe (Deloitte, 2013).
The tax earnings from tourism add up to the GDP of the United Kingdom. It is approximated that the total tax earnings from tourism in the United Kingdom account for over 30% of the total export earnings (Deloitte, 2013). These earnings are used by the government in development projects. These include the maintenance and upgrade of infrastructure. This in turn, has the impact of stimulating the economic growth of the United Kingdom through the provision of an enabling business environment.
Another considerable impact of tourism to the economy of the United Kingdom is that it is a source of revenue for business. The provision of goods and services to tourists is undertaken by the business units existing in the United Kingdom. They facilitate the comfort of the international and domestic tourists during the excursion. In turn, the tourists pay for the goods and services provided (Office for National Statistics, 2012). This facilitates the trade process; the exchange of goods and services for money. Trading activities are an important component of the economy. Through the creation of revenues for the owners of the businesses directly related to tourism, the trading activities positively impact the economy of the United Kingdom.
Tourism can also have a significant impact on the economy indirectly. The revenues generated for tourism related business owners are spent on the procurement of supplies (Surugiu, 2009). These include food from agricultural businesses, beverages, transportation, electricity and communication. The employees working in the tourism related businesses are also empowered to spend their earnings on other goods and services. This way the tourism industry generate income for other non-tourism related businesses (The Tourism Alliance, 2012). This phenomenon is known as the flow-on effect or the multiplier effect (Daniel, 2011). It shows the passing down of benefits down the supply chain. This has a ripple like effect where the tourism industry affects the performance of the other industries down the supply chain. When there is an increase in the number of tourist earnings in the tourism industry in the United Kingdom, the other sectors that are not tourist related also experience growth. This impacts the economy in a positive way.
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Deloitte (2009) Tourism jobs and growth; the economic contribution of the tourism economy in the UK. United Kingdom: Deloitte.
Office for National Statistics (2012) The Economic Importance of Tourism: UK Tourism Satellite Account, 2009. United Kingdom: Office for National Statistics.
Surugiu C. (2009) the Economic Impact of Tourism; an Input-Output Analysis. Romania.
The Tourism Alliance (2012) UK tourism statistics 2012. United Kingdom: The Tourism Alliance.
The World Travel and Tourism Council (WTTC) (2013) Travel & Tourism Economic Impact 2013: United Kingdom. London: The World Travel and Tourism Council (WTTC).