Tourism Industry Council
Brexit Response Paper
Tourism Industry Responses Collated for the Tourism Industry Council
DECEMBER 2016
Contents
1. Introduction
2. Background
a. Value to the UK economy
b. Links with Europe
3. Impacts
3.1 DExEU Unit - Justice, Security and Migration: Employment
a.Severe recruitment challenges to be compounded by Brexit
b.Employment rights related to the UK’s outbound travel sector
3.2 Visas and travel facilitation
a.Visa liberalisation/travel facilitation
b. EU ‘ESTA’
c. Border Control
3.3 DexEU Unit – Market Access
a.Single Aviation Market
b.Aviation Regulation
c. Customs Union
d. Industry Investment
e. Reliance on Imports from the EU
f. Corporate Travel
g. Other Travel Agreements
h. Motor Vehicle Regulations
3.4DExEU Unit – Domestic Consequentials
a. EU Funding programmes
4. Opportunities
4.1 DExEU Unit – Domestic Consequentials
a. Domestic Air Passenger Duty
b. Package Travel Directive (Domestic Tourism)
c. Aviation State Aid Guidelines
4.2DExEU Unit – Market Access
a. Tour Operators Margin Scheme (TOMS)
1. Introduction
On 23rd June 2016, the British public voted for the UK to leave the European Union. The Government has agreed that the outcome of this vote will be respected and acted upon by the UK Parliament.
At the Tourism Industry Council meeting on 5th September 2016, it was agreed that there were a number of significant potential impacts and opportunities for the UK tourism industry related to the UK leaving the EU. As such, the Council decided that it would develop thisindustry-wide document for the Department of Culture, Media and Sport (DCMS) and the Department for Exiting the European Union (DexEU), identifying these issues so that they could be taken into account during the Government’s forthcoming negotiations on the UK’s new relationship with the EU.
2. Background
a. Value to the UK economy
Tourism is one of the UK’s largest and best performing industries. It is made up of 250,000 inbound, outbound and domestic travel and tourism businesses which are integrally linked to one another, often utilising the same infrastructure, consumer base and regulatory framework. As well as comprising high numbers of SMEs, the sector is also home to some of the world’s largest tourism companies who choose to locate, and often headquarter, their operations in the UK.
Together, these businesses make the tourism industry the UK’s third largest employer and a significant force in the UK economy. The sector provides jobs for 3.1m people (over 9.6% of the UK workforce) and contributes £127bn to the economy (7.1% of GDP). Crucially, the sector also underpins wider economic growth: for every £1 million the industry generates in GDP, it produces another £1.5 million elsewhere in the UK economy, and for every 10 direct jobs, it creates a further six across the country.
Notably, the tourism industry has been at the forefront of the UK’s economic recovery. Since the global economic recession in 2008, the sector has provided growth for the UK economy at a faster rate than most other industries and increased export earnings by 26.5%. The Office for National Statistics found that the tourism industry provided almost a third of the additional 900,000 jobs that were created in the UK between 2010 and 2013, and that these roles were located across the country in rural, urban and seaside communities.
Globally, the UK inbound tourism industry is the sixth largest in the world based on value, contributing £25.4bn per annum to the UK economy in export earnings with the revenue generated by these overseas visitors providing direct fulltime employment for 470,000 people in the UK.
Importantly, the World Economic Forum ranks the UK tourism industry as the fifth most competitive in the world, meaning that it is highly productive and able to provide significant growth for the UK if provided with a supportive regulatory environment.
b. Links with Europe
The tourism industry’sgrowth is dependent upon visitors from other EU countries - of the UK’s top 10 source markets for inbound tourism, eight are other EU countries. The 23m visitors from other EU destinations (67% of all visitors to the UK) contribute around £10bn to the UK economy each year including taxes such as Air Passenger Duty and revenue to UK carriers. This expenditure directly supports around 185,000 full time equivalent UK jobs.
The reason for the high level of tourism to the UK from other EU countries is not simply due to their close proximity. A large number of EU regulations, rules and directives have been developed and implemented over the last 40 years that are specifically designed to facilitate the movement of EU residents across national borders. These range from agreements that facilitate the operation of UK companies in Europe such as the Aviation Single Market through to Consumer Protection initiatives such as the Package Travel Directive and procedures such as the EU visa channel that expedite border control checks and reduce waiting times for visitors.
This harmonised Single Market framework has encouraged business and leisure tourism flows between the UK and the rest of Europe, allowing the UK tourism industry to grow to become one of the largest in the world and a key component of the UK economy.
It is therefore important that the UK retains those current EU arrangements that facilitate tourism development and growth while, at the same time, identifying opportunities that may arise from leaving the EU.
3. Impacts
3.1DExEU Unit - Justice, Security and Migration: Employment
a.Severe recruitment challenges to be compounded by Brexit
The UK tourism industry employs 3.1m people (9.6% of the UK workforce) and has experienced considerable growth in recent years. For example, the increase in tourism revenue in 2015 alone was sufficient to create an additional 100,000 jobs in the UK economy.
This growth has been greater than the ability of UK educational and training institutions to provide skilled workers, resulting in tourism businesses becoming increasingly reliant on workers from other EU countries to fill vacancies in the industry
Figures from People 1st, the Sector Skills Council for the tourism and hospitality industries, show that employees in the sector that were born overseas has increased from 22% in 2011 to 24% in 2015 in response to the rapid growth of the UK tourism industry and increasing skills shortages in the local labour market. In London, 64% of the workforce are migrant workers. Of the number of migrant workers working across the sector in the UK, 45% are EU nationals.
Evidence from members of this Council suggests that the percentage of EU nationals working in the sector is up to 50% in London and the South East and as high as 65% for individual businesses. The increase in foreign nationals in the UK tourism industry is due to a number of factors including the rapid growth of the UK tourism industry, increasing skills shortages in the local labour market and a decreasing unemployment rate. The EU nationals work in a wide range of roles and are highly valued part of our skilled workforce. They provide valuable service and language skills, international experience and actively contribute to the UK providing a high quality experience for visitors.
Impact
As a sector, we already face challenges in terms of recruitment and retention. People 1st estimate that the sector will require 1.3m new staff by 2024 due to growth and high turnover rates. This high level of demand for staff means that 18% of businesses are already reporting that the staff that they are employing lack essential skills. This compares with just 14% of all businesses in the UK reporting this problem.
Even with freedom of movement between EU countries, the UK’s unemployment rate has dropped to under 5%, putting pressure on tourism businesses trying to source workers. This high level of demand for staff means that there are currently 10,000 unfilled positions in the tourism sector and that 21% of businesses reporting that the staff that they are employing lack essential skills. This compares with just 15% of all businesses in the UK reporting this problem.
Evidence from the People 1st shows that dependency on EU nationals increases where local unemployment rates are low. This strongly suggests that EU nationals are not taking tourism jobs that could be filled by UK citizens, but rather they are filling positions where there are no UK nationals available.
Should the industry suddenly cease to have access to this broad talent pool, particularly when the UK unemployment rate is so low, it would present severe, fundamental operational challenges. Tourism businesses are already engaged in expanding apprenticeships, work programmes and retention drives. However, initial analysis indicates this shortfall cannot be filled by these measures in the short to medium term, exacerbating current staffing and skills shortages. As staff shortages increase, this will force up wage costs for businesses.
Evidence
The People 1st report, Migrant workers in the hospitality and tourism sector and the potential impact of labour restrictions, shows that 11% of all tourism employees in the UK are EU nationals. Anecdotal evidence from members of this Council show that the actual figure is much higher however.
The percentage of migrant labour from the EU increased to 46% between 2011 and 2015, reflecting the tightening labour market, where unemployment fell from 8.1% 5.4%. This indicates that while the overall level of EU nationals working in the industry is 11%, as the UK employment rate has decreased, the UK tourism industry has become increasingly dependent upon EU nationals. As such, if the tourism industry is to continue to grow and provide the UK with increased export earnings, then a mechanism needs to be established by which businesses can source the staff required.
There are particular staff shortages for chefs in pubs and restaurants who need specific skills. It also should be noted that many businesses in major towns and cities rely on overseas workers and it would be impossible for all of these jobs to be filled by the local workforce. In pubs in particular, but also elsewhere in hospitality, soft skills are as important as skilled workers.
Desired Outcome
To help resolve the issue of finding skilled staff, the tourism industry would want the Government to negotiate a deal with the EU that retains the ability of EU nationals being able to come to the UK to work in the UK tourism industry. If retaining the free movement of EU national to the UK is not possible then the current migration system needs to be revised before the UK leaves the EU.
One way to achieve this is to reopen TIER 3 and have the Migration Advisory Committee work with People 1st to monitor staffing requirements of the tourism and hospitality industry and develop criteria for allowing people into the UK fill shortages in the industry.
We would also urge the Government to consider opportunities for targeted use of work permits for priority sectors and a review of the Shortage Occupation List to facilitate business growth.
In terms of work permits, many tourism destinations such as London and businesses that predominantly facilitate corporate travel operate year-round and there is little seasonal impact. As such, short-term solutions will not address recruitment challenges or support the sector’s commitment to grow and develop skilled staff to work in the industry for the long-term.
Those employed in tourism work in a range of skilled and so-called ‘unskilled’ or entry-level roles. Many of the sector’s employees, even those in entry level positions, have excellent customer service, culinary and language skills. We would therefore ask Government to consider these factors when evaluating what constitutes a ‘skilled’ job in relation to any future work permit system.
Experts
People 1st
BHA
BBPA
b.Employment rights related to the UK’s outbound travel sector
The EU Posted Workers Directive is a vital component in the operational delivery of UK travel businesses, enabling travel businesses to temporarily place workers in other EU Member States without the need to register individuals in each territory for the purposes of taxation or social security (Directive 96/71/EC). Many tour operators, especially SMEs and those without registered businesses in other EU countries, rely on this EU regulation to reduce red tape and simplify their operations across the EU. The millions of UK holidaymakers within the EU each year also take comfort from the ability to seek help from an English-speaking representative in their resort. The removal or restriction of these employment rights would represent a substantial burden for UK travel companies, harming their ability to compete with European competitors and significantly increasing operating costs and complexity. The EU outbound industry strongly believes that these employment rights should be retained in negotiations with the EU on a future trading relationship.
In addition, there is a close relationship between the movement of workers and continuation of market access in the transport sector that must be borne in mind during negotiations. A large proportion of international airline, coach and rail staff are EU nationals and any restrictions on the ability to move these staff between the UK and the EU for operational purposes would likely have serious repercussions for travel to and from the UK.
Experts
ABTA
Confederation for Passenger Transport
3.2Visas and travel facilitation
a.Visa liberalisation/travel facilitation
In terms of boosting tourism from alternative markets, data from the Office for National Statistic’s International Passenger Survey shows that the UK receives around 2.5m visitors from countries needing a visitor visa to enter the UK. These visitors spend around £4bn in the UK during their stay, provided direct employment for over 76,000 people in the UK.
What is especially noteworthy of visa-national visitors to the UK is that they spend an average of £1586 per person per visit – almost three times the amount (£560) spent by visitors from visa waiver countries.
In addition, over 550,000 people, ranging from students through to business executives, come to the UK each year to improve their English. This sector contributes £1.1 billion and supports around 26,500 jobs. Students’ contribution to the UK economy does not end with the fees that they pay to English language schools. In 2014 there were over 235,000 juniors attending holiday programmes.
Research by London First, ‘London Calling: International students’ contribution to Britain’s economic growth’, shows that 60% of students, including alumni, said they are more likely to do business with the UK as a result of studying here.
Evidence
The Tourism Alliance has shown that the UK’s share of outbound travel from BRIC countries that require visas has almost halved over the last 10 years despite significant improvements in the product and services provided by the Home Office during this period. One of the main reasons for this reduction in the UK’s share of the BRIC markets was the introduction of biometric visas, which lowered the competitiveness of the UK visa product. While the industry does not advocate reducing security by removing the need for biometric data, there needs to be a thorough review of the UK visa offering and a cross-government strategy developed for regaining the UK’s share of key overseas markets.
The Government made improvements to the Chinese visitor visa process during the last parliament. However, the UK China Visa Alliance suggests that the UK still underperforms in the number of Chinese visitors it attracts compared with other major European countries. The industry needs clarity on the impact of Brexit – in particular on the UK-Belgian Visitor Service scheme which was a key aspect of the recent improvements – and on our future ability to partner with EU countries on joint processing initiatives. While officials have stated that leaving the EU will have no impact on arrangements such as the Belgium tie-up, there needs to be official confirmation of this. The Government should look to expedite plans for the proposed 10 year tourist visa – particularly in light of Schengen countries introducing biometric visas – particularly in light of Schengen countries introducing biometric visas.
We should also look to extend improvements in the visa processing system to other growth destinations. A first step in this approach is to introduce the two-year low cost visa in the Indian market as part of a new trade deal with India. The Royal Commonwealth Society highlights that Britain’s market share of India’s outbound tourists has halved since 2006, despite the market growing at 10% each year, at a cost of £500 million to the economy. Streamlining tourist visas for Indian visitors would send a very positive signal that the UK is ‘open for business’ as we look to enter into trade negotiations with non-EU growth markets.
There is also the need to separate student numbers in immigration figures, acknowledgethat facilitating the number of people coming to the UK to study is an essential component of generating tourism and economic growth and develop a specific plan to realise this. This plan needs to include a visa system for students that is international competitive.
Experts
UK inbound
English UK
Tourism Alliance
Cruise Lines International Association (CLIA) / Royal Caribbean
b. European Travel Information and Authorisation System (ETIAS)
Due to heightened security concerns after the recent terrorist attacks in Brussels and Paris, the EU Commission has just published proposals for an ETIAS system based on the US scheme. This would require international travellers that are exempt from visa requirements to apply for permission to travel to the EU. The proposed ETIAS would last for five years with applicants able to apply online at a cost of 5 euros.