A downbeat 2018 forecast for the travel industry has been issued with a warning that trade demands for a cut in Air Passenger Duty are likely to fall on deaf ears.
Trade associations such as Abta and UKinbound have joined forces with the aviation sector to urge chancellor Philip Hammond to lower APD by at least 50% in next week’s Budget
But Rajeev Shaunak, head of travel and tourism at top 20 UK accounting firm MHA MacIntyre Hudson, believes this will be a hard battle to win.
“The fall in the value of sterling means holiday prices are up for 2018 which, together with Brexit worries, has led to speculation that it won’t be a great year for the travel industry,” he said.
“The industry has been demanding a cut in APD for several years. The airlines and some trade associations believe the tax reduces demand as people departing UK airports pay several times more than in other EU countries, where only a small proportion actually charge departure duties.
“However, this may be a difficult argument to win. APD generates approximately £3 billion for the UK treasury and any reduction would impact other politically sensitive areas such as health, education and social services.
“There’s also a danger that if the tax is cut, airlines, already under pressure from increasing oil prices, will simply raise fares. This will leave passengers, and the industry, no better off.”
Shaunak added: “The most important factor for the sale of holidays is an increase in the ‘feel good factor’, and putting more money into people’s pockets is the easiest way to do that.
“Stimulating the economy is vital and an increase in personal tax allowances will encourage spending. The relationship between stimulus measures and spending on travel is complex though.
“If stamp duty is cut, for example, it would prompt more people to move, and disposable income for travel may fall.
“2018 already promises more legislation for the travel industry than in the last ten years, and this is outside the chancellor’s control.
“Where he could make a difference to travel is to make sure there are no further increase in the costs of employing staff – this means no increase in income tax or national insurance. If he doesn’t, the travel trade may see business fall even further.”