UK's GDP growth slows, tourists are returning, but numbers are still low

By

Sandra Halliday

Published
Apr 11, 2022

The UK’s economy grew 0.1% in February, official figures showed on Monday, and while that growth had slowed from January’s +0.8%, there was a crumb of good news for retail as it seems that tourists are returning.

Tourist shoppers had been key for many businesses and locations pre-pandemic but they’ve been absent for two years due to Covid.

The services sector was the big growth contributor to February’s rise with a 0.2% uplift, helped by both inbound and outbound tourism.

That said, UK manufacturing fell “notably” during the month, the Office for National Statistics (ONS) said.

TOURISTS ARE BACK... IN A SMALL WAY

The ONS didn't give any specific numbers for tourist arrivals in Britain.

Tourists are always good for retail, but there are limits to how big an impact tourism might have on fashion stores for now. That’s especially the case after the rules on tax-free shopping for tourists were changed last year to all-but-abolish the perk.

There have since been a number of reports saying high-spending fashion shopping tourists are shunning the UK.

And evidence of that came on the same day as the ONS’s GDP report when the UK’s biggest airport, Heathrow, issued an update. It said it has seen a surge in travellers passing through. But while that should boost airport retail, it’s unlikely to help domestic retailers for now.

That's because Heathrow said “demand is being driven by outbound leisure at weekends and during school holidays, as Brits make the most of the freedom to travel and cash-in vouchers from trips cancelled during Covid”. Retailers in popular destinations abroad are likely to benefit.

And despite the ONS reporting larger numbers of tourists arriving in Britain, Heathrow said that “inbound leisure and business travel remains weak due to high Covid levels in the UK and the requirement to test before returning home”.

It seems we’ll have to wait a while longer for affluent foreign tourists to decide that the UK is once again their chosen destination for luxury fashion shopping trips.