Eleven months since the UK took the momentous decision to leave the European Union, the economy has been remarkably resilient although the latest data from the Office for National Statistics (ONS) last week showed that the effect of rising prices, due largely to the fall in the pound over recent months, has slowed down the unexpected growth in since June 2016.
According to official statistics, the economy expanded by only 0.3 per cent in the first quarter of 2017, less than half of what was experienced in the last quarter for 2016 and slightly below the 0.4 per cent that was generally expected by economic forecasters. This was largely due to a slowdown in the growth within the services industry which accounts for the majority of the UK’s economy, with increased prices affecting consumer spending.
However, with the current UK Government looking to develop a more balanced economy once Brexit has been completed, it was heartening to see that construction had grown by 0.2 per cent whilst production, which includes manufacturing, had gone up by 0.5 per cent in the first three months of the year.
This suggests that the fall in the price of the pound has helped UK manufacturers to export more goods overseas and this finding was supported only this week by the latest Purchasing Managers Index results which showed that manufacturing performance amongst UK firms was at a three year high.
That is good news for Wales, which is more dependent on manufacturing for the economy than any other part of the UK and which has seen this sector boost prosperity over the last few years.
However, what about other key sectors in our economy such as tourism? What potential effect will Brexit have on their development in the future?
Initial indications as to the prospects for the tourism industry can be found within a report recently published by Barclays Bank.
“Destination UK: driving growth in the UK hospitality and leisure sector” recently interviewed almost 10,000 guests from all over the world on their preferences and the results are heartening for those working in the sector in North Wales.
The good news is that two thirds of international holidaymakers are more interested in coming to the UK for a vacation with the weakness of the pound (and therefore higher spending power) being cited as major factor.
The majority of international holidaymakers also stated that Brexit would have no impact at all on their decision to visit the UK. Nearly a third said they more likely to visit than prior to last year’s referendum although some (notably those from Australia) would have worries about being able to combine a trip to the UK with destinations to other parts of Europe.
The drop in the value of the pound has also prompted more UK holidaymakers to consider staying at home this year for their holidays, with four in ten stating that ‘staycations’ offered better value for money than going abroad.
Whilst this is good news for the future, there are also potential problems envisaged for the industry if they are not addressed in the Brexit negotiations.
For example, EU migrant workers in the hospitality sector account for approximately 15 per cent of its 4.5m strong workforce or approximately 700,000 people.
As a result, there remain real concerns by tourism operators about being able to manage future growth if this issue is not dealt with, especially as the current lack of skilled UK workers could leave operators unable to fill the gaps in the workforce.
However, it would seem that despite (or because of) Brexit, the tourism and hospitality sector looks set to enjoy another successful year due to increases in both international and domestic visitors.
For Wales, there could be a real opportunity for the Welsh Government to use their £5 million “Year of Legends” tourism campaign to make a real difference, especially given the evidence from the Barclays study that high-profile advertising campaigns are having a positive effect on overseas visitors’ choice of holiday destination.
And given that history and natural landscapes have been found to be amongst the top experiences that tourists are looking for when visiting the UK, there is a real opportunity for the Welsh Government to ensure that the increased number of visitors expected in the UK over the next few years not only go to the usual favoured locations of London and Scotland but are also attracted to spend their time and money in Wales.