The UK economy is lagging behind other Western countries’ growth and actually declined by 0.4% in the third quarter of this year. While investor confidence in the stock market has bounced back since the spring, the real economy for owner-managed businesses will remain tough into 2010.
With a general election next spring, whichever government gets elected will have to deal with the mountain of public sector debt that is weighing down UK plc.
It is very likely that by next summer we will see interest rates increasing to attract investment, largely from overseas, into government debt issues.
The low interest rates we have enjoyed for more than a year are great for those with a mortgage to pay off, but not so nice for those whose income is pegged to savings and the stock market.
As interest rates rise next year, we can expect to see fewer families booking because of less disposable income. However, the grey market will start to feel more confident again. Make plans now on how you might attract those more senior citizens.
Public sector debt is a big issue, and regardless of whether Labour remains in power, there will need to be cutbacks in the much-expanded civil service. If, as seems likely, the Conservative Party wins the next election, these cuts are likely to be even greater. So we can expect a surge in public sector unemployment over the next two years, which will inevitably depress further the mass-market holiday demand.
Customers are keen to make their pound go further, and with exchange rates heading for parity with the euro, we will see further reductions in demand for destinations such as Spain and Greece, with growth in non-euro destinations like Turkey and Egypt.
This trend will continue as customers talk to friends who this year enjoyed better-value holidays as a result of travelling outside the eurozone. Regardless of the dollar rate, holidays to the US will remain popular. Such is the pull of America – with great value for money compared to what we currently see here in the UK.