UKinbound - Written Evidence (UKE0051)

The UK-EU relationship

House of Lords European Affairs Committee Inquiry

Submission by UKinbound

Friday 28 October 2022

Lord Kinnoull

Chair, European Affairs Committee

House of Lords

London

SW1A 0PW

Friday 28 October 2022

Dear Lord Kinnoull,

UKinbound Evidence submission to the House of Lords European Affairs Committee Inquiry into the UK-EU relationship

I would like to begin by thanking the committee for launching this inquiry and for the opportunity to present evidence.

Please find enclosed an evidence submission from tourism association UKinbound, which represents the interests of the UK’s inbound visitor economy, the UK’s second largest service export industry, second only to financial services, worth £28.4 billion to the UK economy in 2019.

Our submission features both short and long-term stimulus, which would encourage growth and prosperity between the UK and EU, aid the levelling up agenda, enhance the UK’s soft power credentials and encourage international inward investment from the EU.

Key points we have raised are –              

• Impact of the removal of ID Cards on the student, under 18s, group travel sector
• Implications of the removal of tax-free shopping
• EU-UK movement of labour
• Opportunities available via the UK’s current Youth Mobility Scheme
• Cabotage implications for EU coach operators travelling to the UK
• Introduction of ETAs and ETIASs

My members and I would be happy to address the committee in person to discuss the contents of our submission.

Yours sincerely,

Joss Croft                                                       

Chief Executive

Background

This submission is made by UKinbound, an association that represents over 330 UK businesses that facilitate visits to and across the UK for international and EU visitors.

These UK businesses include accommodation providers, attractions, destination management companies (DMCs), destination marketing organisations (DMOs), service providers (including restaurants, transport, retail, ticketing and professional services), and tour operators. They are all vital to the UK’s inbound tourism supply chain from the EU.

In 2019 40.1 million international visitors came to the UK spending £28.4 billion in the UK economy[1] . Of these visitors, 61%[2], 24.83 million, were from an EU member state, spending £10.7 billion in the UK economy[3].

For the full 2022 calendar year, VisitBritain is forecasting that inbound visits will increase to 26.7 million and spending to £21.6 billion. These are 65% and 76% respectively of the visits and spend levels seen in 2019[4].

The UK is however trailing behind its European counterparts with regards to the recovery of its inbound visitor economy. Statistics from the United Nations World Tourism Organization show that by May 2022, international arrivals in Western Europe had recovered to 79% of pre-pandemic levels[5].

The UK’s inbound visitor economy is the country’s second largest service export, second only to financial services. It is of greater export value than UK vehicle exports and oil exports from the North Sea.

UKinbound Evidence Submission

With regards to this inquiry, UKinbound has provided responses to the following questions –

-          14. How important are cultural and educational links to the overall UK-EU relationship and the UK’s soft power?

• b. The Government has launched a domestic alternative to the Erasmus+ programme - the Turing scheme. To what extent has this been an adequate replacement for the Erasmus+ programme?
• c. How has Brexit impacted school visits between the UK and the EU?

-          15. Are there any changes you would like to see the Government pursue as far as the UK-EU cultural and educational relationship is concerned?

• a. To what extent would these require negotiation with the EU?

-          16. What has been the impact of the TCA’s mobility provisions on UK businesses and individuals, and particularly on young people?

• b. Is the travel sector well served by the current arrangements?
• c. To what extent is it possible to distinguish between the impact of Brexit-related restrictions to business mobility on the one hand, and Covid-related travel restrictions and working patterns on the other?
• d. Have Brexit-related restrictions to mobility become more apparent as international travel has resumed?

-          17. Are there any changes you would like to see the Government pursue as far as UK-EU mobility is concerned?

• a. To what extent would these changes require negotiation, either with the EU or bilaterally with Member States?

14. How important are cultural and educational links to the overall UK-EU relationship and the UK’s soft power?

The UK and EU are entwined by history, have extensive cultural connections and broad educational synergies, these key bonds cement our relationship. In addition to these bonds, perceptions about the UK by EU audiences are formed from and through tourism – either by visitation or through promotional messaging. The inbound visitor economy is an important component of the UK’s soft power credentials as it helps to maintain our international profile and shape overseas perceptions.

In a recent piece of consumer research undertaken by VisitBritain, potential visitors from EU member states were asked to rank their top perception of Britain. Those from Austria, Belgium, the Netherlands, Germany, Poland and Denmark ranked ‘There are vibrant towns and cities to explore’ as their top perception of the UK[6]. Germans and Italians ranked ‘Is a place where I can explore history and heritage’ as their 2nd most important perception of the UK[7]. It is clear that post-Brexit, and the pandemic, European’s hold strong positive cultural views about the UK.

Pre-Brexit, educational and cultural youth exchanges were a resounding success story for the UK. They had the ability to supercharge growth, provide significant net benefits to the Treasury and drive the UK’s soft power ambitions. We know that encouraging under 18s to visit Britain as part of a group helps create a lifelong connection to our country at an early stage, with individuals more likely to grow up with a positive perception of the UK. These students are then more likely to study at a UK university. An international youth from the EU that has studied in the UK is also more likely to do business and invest here, which helps to directly drive our Global Britain ambitions.

b. The Government has launched a domestic alternative to the Erasmus+ programme - the Turing scheme. To what extent has this been an adequate replacement for the Erasmus+ programme?

International students visiting the UK are an important export revenue generator for the UK economy, however under the Turing Scheme’s question and answer section, the following answer is given to this question –

                            Question - ‘How can a student outside the UK get involved?’ 

Answer - ‘Students cannot apply directly for funding under the Turing Scheme themselves, and those who are studying outside the UK at a non-UK institution will not be eligible’ [8]

Under Erasmus international students could come to study in the UK. These students would spend their money in the UK economy, from accommodation and hospitality to leisure and tourism activities. These students would also often be visited by family members, significantly contributing to auxiliary spend. These students would often secure legal, short-term employment in the UK’s tourism and hospitality industry too, bridging the industry’s recruitment gap. As previously outlined, there is also a strong link between students that study in the UK and then go on to do business here and invest in the country, which positively impacts the UK’s soft power agenda. These benefits however are not being harnessed under the Turing Scheme due to its focus on outbound travel for UK students.

c. How has Brexit impacted school visits between the UK and the EU?

In 2019, 1.2 million[9] EU students under the age of 18 visited the UK as part of a youth group tour, to attend an English language school, undertake a school trip or take part in a cultural and sporting event. Collectively this market contributes over £1 billion to the UK economy[10] annually and sustains over 17,200 UK jobs[11] that transcend all regions of the UK, from cities and towns to the coast and countryside.

Following the UK’s decision to leave the European Union on 31 January 2020, the UK introduced the requirement that all international visitors, including students under the age of 18, need a passport to gain entry into the UK, National ID Cards are no longer accepted. Border Force stopped accepting ID Cards from most EU, EEA and Swiss citizens on 1 October 2021.

This policy change is forecast to cause an 84% decline in EU student group visitors to the UK in 2022. Combining the losses across all student group travel segments, the total loss of revenue is approximately £875m, equating to over 14,500 jobs. In VAT terms, this means a loss to the Exchequer of around £130m in 2022 alone.

The issue is particularly severe in deprived coastal areas across the country that are home to hundreds of language schools. The revenue drain is also being felt by local communities and affecting local families that would normally host these students, and from whom they would historically receive a vital source of income.

In June 2022 the Tourism Alliance undertook research to understand why there has been a decline in European youth group travel to the UK.

235 European youth group travel operators were surveyed, which service 44% of the total number of students travelling to the UK as part of a teacher/supervisor led group. This equates to roughly 524,000 student visitors in any pre-pandemic year.

They were asked to rank potential reasons for this decline on a scale of 1-10 with 1 being not really a reason and 10 being a highly important reason.

The average score for each reason were as follows:

• The requirement for all students to have passports to enter the UK                            8.1
• The increased cost of travel to the UK                                                                      5.9
• Concerns regarding Covid                                                                                                  4.9
• Concerns regarding congestion/delays at Borders                                                        4.2
• Concerns regarding Safety                                                                                                  3.5

Alongside the inbound visitor economy, Brexit has also had an impact on the UK’s outbound youth group visitor economy. Inbound and outbound school and youth group exchanges are often interlinked, both supporting UK jobs and businesses, however, there has been an 80% decline in UK school visits to the EU in 2022 compared to 2019[12]. In 2019 522,320 UK school children made 13,058 overseas visits. This dropped to 101,080 school children and 2,527 in 2022 to date[13].

At the moment UK school and cultural groups can apply for a collective (group) passport. The passport allows for an organised group of young people to make a trip to certain European countries – Austria, Denmark, France, Italy, Malta, Norway, Spain and Switzerland. However, many of these European countries have stopped accepting the UK’s collective passport due to the time it takes to process the groups on arrival.

15. Are there any changes you would like to see the Government pursue as far as the UK-EU cultural and educational relationship is concerned?

The creation of a new youth group visa application process, which is fully digitalised, works in collaboration with ETAs and supports the 2025 UK Border Strategy. It would allow students under the age of 18 that have an ID Card, and therefore the right to live in the EU, and third country national that have settled in the EU, to travel to the UK to take part in an English language school, undertake a school trip or take part in a cultural or sporting event, if accompanied by a teacher or supervisor over 18 years old that is travelling on a passport. 

This would bring a significant benefit to the UK economy, enhance regional connectivity and safeguard jobs.

1. To what extent would these require negotiation with the EU?

The industry would welcome the creation of a government and industry consultation to discuss additional vetting processes that would uphold the UK’s security processes, such as the ratio of adults to children and the types of groups able to apply under the scheme, however as this would be a UK visa, reciprocity and therefore direct negotiations with the EU, would not be required.

16. What has been the impact of the TCA’s mobility provisions on UK businesses and individuals, and particularly on young people?

2. Is the travel sector well served by the current arrangements?

There are a number of areas within the travel and tourism industry that have been directly and negatively impacted by the TCA and policies that have been removed or not been put in place, relating to tax-free shopping, the workforce and European language skills, and cabotage.

Tax-free shopping

When the UK closed its VAT Reclaim Scheme at the beginning of 2021 it became the only European country that does not offer tax-free shopping to visitors. Tax-free shopping was briefly re-instated as part of the September mini budget, but then removed by Chancellor, The Rt Hon Jeremy Hunt MP, who stated that this would save £2 billion a year. However, UKinbound and the Association of International Retail (AIR), have always disputed HM Treasury’s cost estimates for extending tax-free shopping to all international visitors.

There are two reasons we do not believe this figure represents the net impact for HM Treasury of this policy.

1 – HM Treasury’s cost estimate for extending the scheme to EU visitors does not take account of the fact that they spend only one third as much as non-EU visitors[14]. The £2 billion estimated cost is assuming 300% growth of the £650m cost of VAT RES and airside tax-free sales in 2019[15], which even when allowing for new EU spending, does not seem credible.

2 – The Treasury estimate does not take account of the additional tax income that will be generated by increased visitor numbers and spending which will impact on the net effect.

Cabotage

Cabotage for the travel and tourism industry involves the pick-up and set down of passengers outside a coach operators’ home country. While in the single market, European coach operators could drive an empty coach from their home country over to the UK and pick up European passengers who had arrived in the UK via the air. Many UK tour operators and DMCs work with European coach operators to facilitate European trips to the UK, however this is no longer possible under the TCA. The UK has joined the Interbus Agreement as an independent signatory which covers occasional services but not cabotage.

The TCA only allows for the cabotage to take place on the island of Ireland. This means EU coach operators can operate cabotage in Northern Ireland but not from England, Scotland or Wales. This has become a key logistical issue for European coach operators, who are opting to avoid the UK all together and take their customers to other European destinations, such as Ireland. This erodes the UK’s competitiveness and impacts the UK’s export industry.

Employment of EU staff

During the pandemic many EU citizens that were living in the UK returned to their home country in the EU. Many of these EU citizens had the right to live and work in the UK post the TCA, however large numbers of citizens have decided to stay in their home country rather than return to the UK to work in the tourism and hospitality industry.

We have an acute lack of staff with the right language skills in the UK tourism industry, a skill that is vitally important to ensure visitors receive a positive welcome. Language skills are also required by UK companies that are contracting tourism business from the EU. In a recent survey of UKinbound members, 66% said that the challenges the tourism and hospitality industry is facing in retaining and recruiting staff, will impact their ability to operate efficiently, and meet demand over the 2022 winter period.[16] Language skills are not currently on the Government’s Skilled Worker visa: shortage occupation list.

3. To what extent is it possible to distinguish between the impact of Brexit-related restrictions to business mobility on the one hand, and Covid-related travel restrictions and working patterns on the other?

When looking at the inbound visitor economy, although Brexit and Covid impacts can look to be indistinguishable, this is not the case. The speed of recovery and growth of the UK’s inbound visitor economy is slower than that of other countries globally, post Covid and there are a variety of reasons for this. Westminster government support for businesses in the inbound tourism supply chain was limited in comparison with our major competitors – this meant that a restart for UK businesses was not as quick as it was in competitor destinations.

International tourism is a competitive business and post-Covid the UK did not invest in its international marketing as heavily as other countries. The UK’s international reputation was also damaged due to the international perception of how the country had handled the pandemic. Brexit issues have also contributed to the slowdown in arrivals, specifically the removal of ID Card usage and the removal of tax-free shopping, details outlined earlier.

4. Have Brexit-related restrictions to mobility become more apparent as international travel has resumed?

Yes. The 84% drop in EU school children planning to visit the UK this year can be tied directly to Brexit policy changes, but this only became clearly apparent this year as people began to travel again. With regards to tax-free shopping, this issue will also deteriorate next year as the Chinese market begins travelling again but we see them deviate to alternative EU destinations to shop due to the removal of the scheme.

17. Are there any changes you would like to see the Government pursue as far as UK-EU mobility is concerned?

ID Cards - Creation of a new youth group visa application process, which is fully digitalised, works in collaboration with ETAs and supports the 2025 UK Border Strategy. It would allow students under the age of 18 that have an ID Card, and therefore the right to live in the EU, and third country national that have settled in the EU, to travel to the UK as part of an educational or cultural group if accompanied by a teacher or supervisor over 18 years old that is travelling on a passport. 

Youth Mobility Scheme (YMS) – Already in place but not available to EU citizens, the UK YMS is a cultural exchange programme that allows young people aged 18-30 from 11 countries[17] to live, work and study in the UK for a period of two years. The scheme is established through bilateral agreements and is an element of the UK’s soft power in establishing cultural, political and business links between the UK and the other country. Now that the UK has left the EU, there is considerable potential for the UK to use the YMS to increase cultural ties with the EU and negotiate their inclusion in the agreement.

Skilled Worker visa: shortage occupation list – Adding key foreign language skills to this list would aid the growth of the UK’s inbound visitor economy, by fulfilling some of the labour shortage in the industry, which currently cannot be filled by UK citizens.

Global centre for shopping – The UK has the opportunity to establish itself as a global shopping destination, setting us apart from other destinations and making us a more attractive holiday proposition. Reinstating the VAT Reclaim Scheme would allow the UK to establish itself as not only a VAT free shopping haven for non-EU countries, but as a European VAT free shopping hub. Taking into consideration the answer provided in question 16b, and the reasons we believe these figures do not represent the net impact for HM Treasury of this policy, we request that the Office of Budget Responsibility undertake an independent review into HM Treasury’s estimate of the costs of the scheme to ensure that any future decisions are informed by accurate and complete information.

Electronic Travel Authorisation (ETA) and European Travel Information and Authorisation System (ETIA) – With the introduction of the UK’s ETA and the European ETIAS in the coming years, it is imperative that these systems ensure smooth border processing when arriving by land or sea, for both inbound and outbound travellers. This needs to include clear communication to consumers regarding how to obtain and use the ETAs, along with a clear directive to Border Force to ensure their introduction is as seamless as possible. There is a reputational risk to the UK if their introduction creates backlogs at UK airports and ports, which may be avoided via a calculated roll out and collaboration with the aviation and tourism industries.

a. To what extent would these changes require negotiation, either with the EU or

bilaterally with Member States?

The only scheme that would require negotiations/a bilateral agreement is the Youth Mobility Scheme.

-END-

Received 28 October

UKinbound, c/o Strand Palace Hotel, 372 Strand, London WC2R 0JJ

              www.ukinbound.org

Company registration no.: 06460272