Written evidence submitted by Manchester Airports Group

 

 

 

Manchester Airports Group (MAG) response to the DCMS Select Committee call for evidence on ‘Promoting Britain abroad’

 

Introduction

Manchester Airports Group (MAG) owns and operates Manchester, London Stansted and East Midlands airports, which have a significant role in the UK economy. Together, the MAG airports handled around 62 million passengers in 2019 pre-COVID (around 21% of the UK total) and around 670,000 tonnes of freight (26% of freight tonnage handled at UK airports).

Aviation supports several sectors of the economy, both directly and indirectly through its supply chain. Pre-pandemic, MAG employed nearly 6,500 people, rising to 44,000 including those employed by third parties at our airports’ sites. Including indirect and induced employment increases the total number to more than 87,000 jobs, supporting a GVA of over £8bn. Wider economic benefits, in the form of increased business productivity and tourism, increase these impacts further, to more than 250,000 jobs and £19bn of GVA[1]. Of this, a quarter of the total jobs and 15% of GVA generated (equivalent to £3bn) is from tourism.

Impact of Covid 19

The COVID-19 pandemic devastated the aviation and travel sectors, practically overnight. Aviation businesses were effectively closed. Each national lockdown reduced passenger numbers across MAG to just 1-2% of 2019 levels and the Office for National Statistics Index of Services has consistently shown aviation to be the sector worst impactedby the pandemic.

The Government began to incrementally remove travel restrictions throughout 2021 and passenger levels started to rise – reaching up to 60% of 2019 levels across MAG’s airports. While the industry welcomed this recovery, it did not go far enough and the Government’s ‘traffic light system’ proved confusing and unpredictable. Passengers were not given the level of confidence that they needed to visit Britain in significant enough numbers. The arrival of the Omicron variant in November 2021 then brought the re-imposition of strict restrictions on international travel, including the re-introduction of expensive Day 2 PCR and confidence-sapping pre-departure testing.

Inconsistent and unpredictable changes to travel restrictions have damaged consumer confidence. Passengers must be given certainty regarding the Government’s short-, medium- and long-term plans for international travel, if they are going to commit large sums of money to bookings.

 

The latest research by Oxera and Edge Health indicates that, with Omicron now highly prevalent in the UK, removing all travel testing requirements in January would not impact domestic omicron spread[2]. However, continuing to impose travel restrictions would impose a significant economic cost on the UK. We therefore welcome the decision on 5 January 2022 to remove these additional Omicron travel restrictions and believe the Government should go further and remove all testing on international travel, in line with the available public health evidence.

 

Inbound tourism has suffered as a direct result of travel restrictions. In absence of the recently introduced restrictions, inbound tourism had been forecast to slowly pick up throughout 2021 and continue to recover in 2022 – reaching nearly 59% of 2019 visitor levels. Yet, with the re-imposition of restrictions on travel, MAG has seen passenger levels decrease from 61% at the end of November, to 45% the week before Christmas.

The Government has set a clear ambition in its Tourism Recovery Plan to return to 2019 levels of visitors by 2023.[3] If this is a genuine ambition, international travel and aviation will play a monumental role in achieving it. Currently the Government has no corresponding plan for international travel. The Government should work with industry to develop a targeted roadmap that has the clear ambition of restriction free travel and inspires confidence in passengers abroad.

The importance of retail to international tourism

The UK’s competitive retail offer to international visitors is a core element of what attracts inbound tourism. However, policy changes at the beginning of 2021 mean that the UK is now the only European country not to offer VAT-free shopping to international visitors.

This decision provides a powerful disincentive for inbound visitors from crucial long-haul markets in the US and Asia, who on average spend more per head than short-haul passengers. Many of these travellers will decide on their destinations in Europe based on where they can shop in a tax-efficient way. The marginal reduction in tourism driven by this UK policy decision will impact the UK high street but it will also reduce airport retail yield, which is a core revenue stream for airports. Airport retail cross-subsidises airline charges and allows UK airports to support a broader network of international routes (in turn attracting more travel to the UK, establishing a virtuous circle of growth).

The UK’s international competitiveness could be bolstered by more positive tax-free shopping policies, especially the establishment of arrivals duty free stores at UK airports. These facilities are already in place at European airports, and York Aviation estimates that allowing arrivals stores at UK airports will increase passenger spend in the UK by circa 20% - 30% without cannibalising any spending on the high street. This increased retail activity will create additional GVA and jobs, generating increased tax revenues for the UK Government.

Asks of Government

To fully realise these opportunities, we urge the Government to work with the industry to develop a comprehensive recovery plan and to consider potential changes to the Extra Statutory Concession for VAT, and Arrivals Duty Free Stores.

 

To support the recovery of the UK’s inbound tourism market, the Government should:

 

1)     Use the January Review of the international travel framework to implement fundamental change and create a system that is more robust and transparent, so inbound passengers have the confidence to book international travel in advance.

 

2)     Set out a clear, stated and confidence inspiring ambition to return to restriction free travel as soon as the public health risk allows. The Government should match the ambition of the Tourism Recovery Plan for the aviation sector and set a clear goal of returning to 2019 levels by 2023.

 

3)     Review the decision to abolish the Extra Statutory Concession for VAT and Airside tax-free shopping scheme. Similarly, the Government should look again at the proposal to introduce Arrivals Duty Free stores and repatriate duty free sales to the UK.

 

 


[1]York Aviation (2019) “Economic Impact of the MAG Airports: CSR Update 2019”, Manchester Airports Group

[2] https://www.oxera.com/insights/reports/impact-of-travel-restrictions-on-omicron-in-the-uk/

[3]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/992974/Tourism_Recovery_Plan__Web_Accessible_.pdf