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A No-Deal Brexit scenario (run on Q1 2018) points to further economic slowdown in 2018, whereby the UK is unable to find agreement with the EU, and trade relations revert to the WTO as default. This scenario has a high probability of 40-50% over the next two years. A No-Deal Brexit will take nearly 10 years to recover to the baseline forecast.
Since the Brexit vote at the end of June 2016, pound sterling has lost 15% of its value, which has been a boon for inbound tourism, with Americans and Europeans taking advantage of the weak pound. In a No-Deal Brexit scenario, the British pound is forecast to slide further, depreciating by another 10-11% against the US dollar and euro. This would cause further increases in import prices and inflation to reach 3.0-3.5%. This scenario, thanks to further currency depreciation making the UK more affordable, there could be a further 3.8 million arrivals, amounting to 7.1 million trips in total over the three year period, to reach 45 million total arrivals by 2021. To accommodate this potential, it will be essential for key questions about air capacity, connectivity and immigration to be cleared up, to ensure that travel to the UK is seamless and hassle-free.
Brexit offers the UK a once in a lifetime opportunity to reposition in terms of destination attractiveness and perceived value for money. The UK has previously suffered from being deemed too expensive by visitors, and so as a result of the 15% drop in the pound since the Brexit vote, destinations and travel brands have the opportunity to stimulate higher spending per arrival.
There are massive opportunities for in-destination activities, thanks to the shift to mobile travel sales on-demand during the trip. Business travellers are also a key target for in-trip shopping/activities/ experiences, with the big shift to mobile and ondemand products and services. Luxury is an untapped opportunity, with the UK being home to many iconic luxury brands, such as Burberry and Harrods. City breaks targeting the European shopper looking for a unique in-store experience and authentic British brands, along with all the usual global luxury brands, will be key.
United Kingdom Inbound Spending
Source: Euromonitor International