The Chancellor confirmed that the UK economy continues to perform relatively well, with concerns of a collapse following last
June’s Brexit vote as of yet unfounded. The Office for Budget Responsibility (OBR) has increased its forecast for UK GDP growth in 2017 to 2% (compared to 1.4% forecast last November), albeit this is followed by a slight slowdown in growth in the following years. Employment is also forecast to continue to grow each year, with unemployment already at its lowest level in 11 years. This economic momentum should be viewed positively by the Hospitality Industry, especially when viewed alongside the recent momentum that we have seen in inbound passenger numbers in The BHA Travel Monitor.
However, inflationary pressures will continue to build in 2017 – largely due to the devaluation of sterling – with inflation forecast to hit 2.4% this year, and remain above the Bank of England’s 2% target in both 2018 and 2019. As a result, inflationary pressures on companies are likely to persist, while the OBR also expects higher inflation to slow the pace of consumer spending. The devaluation of sterling is also making the UK more attractive to inbound passengers, which could offset potential weakness in domestic consumer spend. This is something that we continue to track with the monthly release of The BHA Travel Monitor.