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Pound sterling slump after Brexit boosts tourist spending in UK

A weaker pound in the wake of the EU referendum sees a 7% increase in tax free shopping by overseas visitors from Asia and the US

Zlata Rodionova

Tuesday 23 August 2016 09:16 BST

The figures follow previous reports that Britain’s tourism industry could benefit from the Brexit vote in the short term (PA)

Tourists’ spending has increased significantly following UK’s vote to leave the EU as visitors made the most of the post-Brexit slump in sterling.

International tax-free shopping spending rose 7 per cent overall in July, compared to the same month last year, according to retail tourism analyst Global Blue.

Visitors from Japan, Indonesia and the US accounted for the biggest increase with spending by Japanese visitors up 96 per cent compared to the same period in 2015.

Travellers from Indonesia spent 88 per cent more than last year on tax- free shopping, followed by US shoppers with an increase of 46 per cent compared to 2015.

“Though the weaker pound following the referendum was initially unwelcome news, it has proved perfect timing for tourists visiting the UK; enjoying our British leisure, luxury and cultural offering during the summer season,” Gordon Clark, Global Blue managing director UK, said.

The figures follow previous reports that Britain’s tourism industry could benefit from the Brexit vote in the short term.

Economists from the Office of National Statistics, last week, said that there were signs the steep fall in sterling since the June referendum might have attracted overseas shoppers to the UK.

“There is… anecdotal evidence from respondents suggesting the weaker pound has encouraged overseas visitors to spend. Department stores and specialists retailers like jewellers are among those reporting a good month,” Joe Grice, the chief, economic adviser to the ONS, said.

Swiss watch exports to the UK were more than 13 per cent higher in the month after the country voted to leave the EU than a year earlier, the Swiss watch industry federation reported on Tuesday.

Previous research from Tourism Alliance suggested there were 18 per cent more foreign visitors and 11 per cent more British tourists in London in July compared with the same month in 2015.

Airbnb, an online accommodation website, saw a 24 per cent uplift in London visits in July compared to June.

6 ways Britain leaving the EU will affect you

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1/66 ways Britain leaving the EU will affect you

6 ways Britain leaving the EU will affect you

More expensive foreign holidays

The first practical effect of a vote to Leave is that the pound will be worth less abroad, meaning foreign holidays will cost us more

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6 ways Britain leaving the EU will affect you

No immediate change in immigration status

The Prime Minister will have to address other immediate concerns. He is likely to reassure nationals of other EU countries living in the UK that their status is unchanged. That is what the Leave campaign has said, so, even after the Brexit negotiations are complete, those who are already in the UK would be allowed to stay

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6 ways Britain leaving the EU will affect you

Higher inflation

A lower pound means that imports would become more expensive. This is likely to mean the return of inflation – a phenomenon with which many of us are unfamiliar because prices have been stable for so long, rising at no more than about 2 per cent a year. The effect may probably not be particularly noticeable in the first few months. At first price rises would be confined to imported goods – food and clothes being the most obvious – but inflation has a tendency to spread and to gain its own momentum

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6 ways Britain leaving the EU will affect you

Interest rates might rise

The trouble with inflation is that the Bank of England has a legal obligation to keep it as close to 2 per cent a year as possible. If a fall in the pound threatens to push prices up faster than this, the Bank will raise interest rates. This acts against inflation in three ways. First, it makes the pound more attractive, because deposits in pounds will earn higher interest. Second, it reduces demand by putting up the cost of borrowing, and especially by taking larger mortgage payments out of the economy. Third, it makes it more expensive for businesses to borrow to expand output

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6 ways Britain leaving the EU will affect you

Did somebody say recession?

Mr Carney, the Treasury and a range of international economists have warned about this. Many Leave voters appear not to have believed them, or to think that they are exaggerating small, long-term effects. But there is no doubt that the Leave vote is a negative shock to the economy. This is because it changes expectations about the economy’s future performance. Even though Britain is not actually be leaving the EU for at least two years, companies and investors will start to move money out of Britain, or to scale back plans for expansion, because they are less confident about what would happen after 2018

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6 ways Britain leaving the EU will affect you

And we wouldn’t even get our money back

All this will be happening while the Prime Minister, whoever he or she is, is negotiating the terms of our future access to the EU single market. In the meantime, our trade with the EU would be unaffected, except that companies elsewhere in the EU may be less interested in buying from us or selling to us, expecting tariff barriers to go up in two years’ time. Whoever the Chancellor is, he or she may feel the need to bring in a new Budget

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Sterling has fallen 18 per cent on a trade-weighted basis since last November.

Last week certain London airport bureaux de changes were retuning less than €1 for each pound offered.

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