According to official figures released on Monday, the UK’s GDP growth experienced a slowdown, expanding by only 0.1% in February. This marked a decrease from the 0.8% growth recorded in January. However, there is a glimmer of hope for the retail sector as tourists are beginning to return after a two-year absence caused by the Covid-19 pandemic.
In February, the services sector served as the main driver of growth, experiencing a 0.2% increase. This growth was supported by both inbound and outbound tourism, providing encouraging news for businesses and locations that heavily rely on tourist spending.
Unfortunately, the manufacturing sector in the UK witnessed a notable decline during the same month, as reported by the Office for National Statistics (ONS). While the specific numbers for tourist arrivals in Britain were not provided by the ONS, it is evident that the return of tourists can have a positive impact on the retail industry.
However, despite this positive development, there are limitations to the current impact tourism can have on fashion stores. Last year, the rules on tax-free shopping for tourists underwent changes that nearly abolished the perk. As a result, several reports have indicated that high-spending fashion tourists are choosing to avoid the UK.
Heathrow, the UK’s largest airport, also provided an update on the same day as the ONS’s GDP report, noting an increase in traveler numbers. However, the majority of this demand is driven by outbound leisure travel during weekends and school holidays, as Brits take advantage of their newfound freedom to travel and utilize vouchers from trips canceled during the pandemic. While this surge in travelers may benefit airport retailers, it is unlikely to significantly help domestic retailers at present. Popular destinations abroad are more likely to reap the rewards.
Additionally, despite the ONS reporting larger numbers of tourists arriving in Britain, Heathrow highlighted the weak state of inbound leisure and business travel. This is primarily due to high Covid levels in the UK and the requirement for travelers to take tests before returning home. It seems that affluent foreign tourists will need more time to consider the UK as their preferred destination for luxury fashion shopping trips once again.
In conclusion, while the UK’s economy experienced modest growth in February, the impact of tourism on the retail sector remains uncertain. While tourists are beginning to return, the changes to tax-free shopping for tourists and ongoing travel restrictions are limiting the potential boost to fashion stores. Domestic retailers may have to wait longer for affluent foreign tourists to fully embrace the UK as their luxury shopping destination of choice.
Useful links:
– BBC: UK GDP grows 0.1% as Covid restrictions ease
– Retail Gazette: GDP growth slows to 0.1% in challenging February for retail
