The travel industry will see no return to political or economic ‘normality’ and must prepare for a hit to customer demand from the sinking pound and rising mortgage rates.
That is the view of political broadcaster and journalist Lewis Goodall, who told Abta’s Travel Convention in Marrakech: “You will have been hoping 2022 and 2023 would be years of normality, but normality is highly unlikely.”
He noted “we’ve become accustomed to the era of cheap money” and warned: “That era has come to an end, and that will affect travel.”
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However, he said: “Cheap money did not lead to a consumer boom. Real incomes are worth no more than they were in 2003.”
Goodall highlighted the current political, economic and international instability, noting: “The new government is only a month old and we’ve seen the rewriting of UK economic policy and a sterling crash lead to a Labour lead of 20-30 points.
“Liz Truss is looking for growth. On the face of it that should be good for the travel industry. [But] government policy has had a chilling effect.”
He warned of a ‘Lehman Brothers’ moment, referring to the collapse of the US investment bank in 2008 which triggered a financial meltdown, and said: “This is different to 2008. Now the government and its relations with the Bank of England [BoE] are part of the problem.
“The Chancellor and BoE are working at cross purposes. The Chancellor wants to inflate the economy and the BoE is trying to prevent that.”
Goodall noted: “Sterling is reaching near-parity with the dollar. The BoE intervened because of huge concern about the solvency of pension funds and gave them two weeks to get their accounts in order.
“The nightmare scenario is that the government and BoE can’t control the gilt markets.”
He argued: “There are certain to be massive spending cuts and that will affect your customers.”
Goodall noted interest rates are forecast to rise to 6% when “350,000 people per quarter are renewing their mortgage rates and it’s costing an additional £700-£800 a month” and warned that would affect demand.
He added: “The IMF reported [this week] that 30% of world economies will be in recession by the end of this year and winter 2023-24 will be harsher than this year. That will hit travel.”
Goodall also highlighted warnings of blackouts this winter amid concerns about the security of Europe’s gas supplies and said: “Your businesses will have to be prepared.”
He suggested: “If Truss survives, the Conservatives will be ever more embroiled in factional disputes. You’ll find the Number 10 door increasingly closed because of the political crisis she has to negotiate.
“A Labour government would almost certainly try to recreate the single market on the quiet. They know the idea of post-Brexit trade deals means very little. But we have a lot of political instability to come before then.”
Photo credit: Arif Gardner