The introduction of the new National Living Wage is likely to lead to a renewed effort from the tourism industry to force the government to cut VAT.
Nigel Dickinson, the managing director of business intelligence company Key Note, said that companies may look to mitigate the extra costs by cutting staff or employees’ hours.
“The domestic and inbound travel and tourism industry will be impacted by this as it employs a disproportionately higher number of lower skilled, lower paid and temporary roles,” he said.
“We also think that the move will give further impetus to the lobbying, which is currently going on from representatives of the industry to lower VAT.” The UK is one of only two EU member states to charge the full rate of VAT for tourism, he said.
The new living wage, which was announced by chancellor George Osborne, will come into effect next April, and will mean that workers are paid £7.20 an hour, rising to £9 by 2020. The presentation at the summit also featured both data from the Office for National Statistics and the company’s own research.
“There does seem to be a huge potential for the travel and tourism industry,” Dickinson said. Neither the volume nor the value of sales for outbound travel have yet to recover to the pre-recessionary peaks of 2007, meaning in theory that there is further room to grow.
Meanwhile, despite talk of Brits heading to far-flung destinations, Dickinson said UK holidaymakers tended to be more risk-averse, plumping for “tried and tested” destinations on holiday.
Between 2010 and 2014 there was a 23.9% rise in the number of trips to EU countries, with Spain the most popular destination. Dickinson suggested that there were a number of factors that could help drive the market, including the cutting of Air Passenger Duty, which has “the potential to encourage greater travel”.