Domestic holidays are on the rise, tourists are spending more and business activity has edged up – but consumers face higher prices as soon as next month, the Bank of England has warned.
In its quarterly round-up of reports from its 12 regional agents, the Bank presented a picture of a robust British economy in the final months of 2016.
The agents, who speak to hundreds of UK companies each month, said that growth in the services and manufacturing sectors improved in the last quarter of the year, helped by the strongest reading for factory exports since the third quarter of 2014.
The Bank added that spending by tourists had risen because of the sharp fall in the value of the pound.
There has also been a rise in ‘staycationing’, with Britons opting to travel closer to home rather than go abroad.
The Bank reported that retail spending by foreign tourists had risen, as UK retail prices fell in foreign currency terms due to sterling’s deprecation.
“Their spending on hotels, meals out and visitor attractions was also higher.
“Increased ‘staycationing’ was also supporting consumer services growth, which had remained resilient.”
However, the Bank warned that consumer demand is expected to slow next year as higher inflation squeezes spending power.