Ian Taylor, executive editor Travel Weekly Group
The departure of Silvio Berlusconi in Italy and appointment of a ‘technocrat’ prime minister in Greece represent steps along the path of the current crisis. They certainly do not signal its end.
It would be tempting to think the UK is well out of it, but of course we are not. David Cameron and George Osborne warned last week the UK could not escape the consequences of the eurozone crisis and various economists issued their own versions of ‘run for the hills’.
Citigroup’s Michael Saunders suggested: “For Europe and the UK this will be about as bad as anything Japan experienced [in the 1990s].”
Jonathan Loynes of Capital Economics argued: “All the indicators point to a deep recession without the euro blowing up. If the euro blows up, it’s another Lehman or bigger.” A former chief economist at the IMF warned: “We are looking into the face of a great depression.”
Perhaps most chilling were the remarks of former Labour chancellor Alastair Darling whose 1,000 days at the Treasury took in the financial meltdown of 2008 and recession that followed.
Darling appears to have understood the seriousness of that crisis rather better at the time than the rest of the government and the governor of the Bank of England – he famously told a reporter ahead of the collapse that we were in the worst financial crisis since the 1930s.
Last week he said: “Not enough people realise how serious this crisis is and how hard it is going to hit us. This is far worse than the banking crisis of 2008.”
The reality is the measures that prevented the crisis of 2008 turning into a depression are largely exhausted. Economic stagnation is now the best hope. The Bank of England will this week slash its UK growth forecast for 2012 and the number of 16-24-year-olds out of work will pass one million.
The European Commission expects the UK economy to fare at least as badly as the eurozone over the next year, forecasting UK growth of 0.6% for 2012. We saw GDP growth of 0.5% in the 12 months to September, so if the EC is right stagnation is already here.
The UK retail sector is suffering. In the past week, we learned from supermarket chain Morrison that one in three shoppers have nothing left at the end of the month. Marks & Spencer revealed a “drastic” increase in special offers, and retail consultancy Conlumino estimated Britons will spend £200 million less this December than last.
Travel and tourism forecasts issued at World Travel Market took in the global economic uncertainty, but fell short of acknowledging the seriousness of the situation.
The World Travel and Tourism Council (WTTC), for example, revised down its forecasts for world growth in travel and tourism GDP, but its figures assumed no recession in Europe despite the European Central Bank predicting a downturn.
A separate report by Euromonitor on behalf of World Travel Market included somewhat optimistic forecasts for 2012 – such as GDP growing 1.6% in the UK, with corresponding increases in the number of trips, tourism receipts, value of air traffic, hotel revenue and so on.
It is hard to see such optimism being rewarded and I’m afraid I do not share the confidence of my colleague David Stevenson who writes the monthly City Insider column for TWbusiness.
Last week David wrote: “The global economy is not (yet) in another recession, and we may be surprised on the upside, fuelled in part by strong levels of confidence on display from corporate and some affluent consumers . . . Europe – and the UK in particular – may surprise to the upside in 2012 if we can steer the continent away from the financial precipice.”
That is certainly one way to look at it. I fear I veer to the downside and was struck at the weekend by the revelation of BBC economics journalist Paul Mason that he had seen leaked bank research that was “so frightening I decided it was impossible to report without causing panic”.
Even the one piece of good news for the UK economy last week – the fall in borrowing costs as investors snapped up UK government bonds as a ‘safe haven’ – had a downside. The low rates hit pension funds, with a knock-on effect on the pension pay-outs of those due to retire shortly.
The eurozone crisis has cut the value of private and company pensions by about one tenth in the last month. That in turn will knock the market for travel by retirees.
In the circumstances, those running travel businesses that are not exclusively high end might want to consider supporting the public sector general strike on November 30 and hope it goes on rather longer than the 15 minutes suggested by cabinet office minister Francis Maude.
Most public sector workers’ pensions are not “gold plated”, so no need for Daily Telegraph-style apoplexy.
But if these pensions go west alongside private pensions, the age of the ‘silver-haired traveller’ – or whatever market forecasters call them these days – may have to be retired too. Just a thought.