Written evidence submitted by the Heart of London Business Alliance (HOLBA)

Promoting Britain abroad: Submission to the Digital, Culture, Media and Sport Committee Inquiry

Heart of London Business Alliance

About Heart of London Business Alliance

• Heart of London Business Alliance (HOLBA) acts on behalf of 600+ businesses and property owners in the area surrounding Piccadilly Circus, Leicester Square, Piccadilly & St James's in Central London.
• As well as being hosts to some of London’s landmark attractions, we operate services that help keep the area clean, safe and welcoming – supporting all those who invest, work, visit and live in the area.
• We are a Business Improvement District – a non-profit organisation funded and voted for by local businesses. As such we offer a range of services, from public realm placeshaping, destination marketing and advocacy, to full management of the area such as cleansing and security.

Reason for submitting evidence

• HOLBA’s members are based in the West End of London and include many of the capital’s most famous brands and venues – which, in normal times, provide one of the UK’s most prominent tourist attractions.
• Our members’ businesses contribute towards and are built on London’s global city status. They depend on tourism as well as providing a significant gateway to tourists, and any threats to the UK’s ‘soft power superpower’ status, and the subsequent impact on the capital’s prosperity, are deeply concerning to our members.

What needs to be done to re-establish the UK as a holiday destination for international travellers?

What should Government and the tourism boards be doing to support the inbound tourism industry in its recovery?

Return of International Tourists Roadmap

• The pandemic has hit central London disproportionately hard due to central London’s reliance on economic agglomeration, including footfall from workers commuting from further afield and international visitors, both of which have dropped significantly.
• In the immediate term, restrictions on visitors need to be dropped as soon as is practicable.
• We need a plan to attract international tourists back to London.
• Whilst footfall in the West End in early December approached pre-pandemic levels this was largely been driven by domestic visitors.
• Central London businesses, particularly in the retail, hospitality and cultural sectors depend on international visitors who on average spend 5x as much as their domestic counterparts.
• Most experts estimate that international tourist numbers will not return to 2019 levels until 2023 at the earliest.
• HOLBA is calling for the government to publish a roadmap – similar to the Tourism Recovery Plan – setting out how and when it envisages international travel returning to pre-Covid levels so the capital’s businesses can plan for the future.

Greater collaboration

• HOLBA supports the UK Government’s GREAT Britain campaign, but there is a need for greater collaboration at all levels to ensure local authorities, tourism boards and central government are all pulling in the same direction.
• The Let’s Do London campaign worked well and achieved good results in boosting domestic visit to the capital, and will need to be continued and enhanced over the coming year to make up for the temporary shortfall in international visitors.

Competitive marketing budget for London

• London will also need a competitive marketing budget, in line with its international competitors, to promote the city globally as a place to visit, including by showcasing its vibrant night-time and cultural economy.
• Prior to the pandemic London was spending half of what Paris and Berlin were, and less than a tenth of Singapore’s spend. We believe that in this period of recovery, investment in promoting London’s global offer will reap significant rewards.

Reduced rate of VAT

• To support the capital’s hospitality sector recover from the pandemic and deal with the current low levels of international visitors, the Government should extend the reduced rate of VAT for the rest of 2022. This is particularly important given that these sectors have had a greatly weakened December due to Omicron.

Visa reform for visitors

• HOLBA supports New West End Company’s calls to simplify the visa application process by introducing quicker, easier visas for HNW visitors: this is vital for London’s long-term competitiveness as a global tourist destination.

Tax free shopping

• HOLBA supports New West End Company’s calls to reverse the decision to abolish Tax Free Shopping, or, at the very least, undertake a more comprehensive and informed study into the full impact of ending the VAT RES and airside tax-free shopping (ESC) on consumer behaviour, business investment, jobs, and Treasury revenue.
• The Government should use the ongoing window of low international visitor numbers to work with retailers and their partners to provide a digital solution to the validation element, linked to existing retailer digital infrastructure, which will provide the necessary capacity, within 12 months and at no cost to government.
• NWEC research indicates the savings from ending tax-free shopping will be entirely eradicated by the loss of revenue from taxable activity, so this has been a false economy by the Government.

Investment in Public Transport

• London needs continued investment in public transport to ensure travelling is seen by visitors as safe and secure and to ensure crucial transport services for workers are available. This should include:
• The full reopening of the Night Tube.
• A return to pre-covid level of bus and rail services across the capital.
• The opening of the Elizabeth Line on time and at no extra cost to businesses
• HOLBA supports a long-term funding settlement for London and acknowledges the recommendations made in London First’s Transport in London report, which advises to move away from overreliance on fares to a more sustainable funding system as a potential solution.

What will the impact on the UK’s hospitality, cultural and heritage sectors be if inbound tourism is slow to recover to pre-pandemic levels?

Damage to London’s unique ecosystem

• The pandemic has hit certain sectors – and therefore those employed in them – much harder than others and the hospitality sector has seen the biggest economic decline of all sectors of the economy since the outbreak of the pandemic.
• Central London’s retail, hospitality, and cultural sectors depend on and feed off each other, and their success is inextricably linked.

• The cultural sector plays a unique role in this ecosystem and has also been badly hit by the pandemic, with many cultural venues unable to operate at all. To give an example of the financial cost at stake, economic analysis commissioned by HOLBA in 2020 shows that the impact of COVID-19 would see the Gross Value Added (GVA) of the West End’s arts and culture sector fall by 97% by 2024 to just £100m compared to £4.9bn GVA in 2019 in a scenario involving repeated strict lockdowns, venues and offices remaining largely unoccupied, essential travel only recommended by the government and the digitalisation of entertainment becoming the default alternative to in-person live experiences – i.e. similar to what actually happened.
• This hit to the cultural sector will be exacerbated should its skilled central London workers move jobs to other sectors that are less dependent on live audiences, such as TV and film, which evidence suggests is currently the case.
• In 2019 London had 21.7 million visits from international travellers with a spend of £15.73 billion.  International visitors represent 65% of overnight visits and they account for 84% of overnight spend.

Does the Tourism Recovery Plan go far enough to support the industry’s recovery from the Covid-19 pandemic? 

What are the biggest challenges to delivering the plan?

Recruiting for the hospitality sector

• The pandemic has resulted in significantly drained cash reserves for London’s businesses, impacting negatively on their ability to invest and retain employees. Our members unanimously agreed that depleted cash levels have had a negative knock-on impact on hiring.
• The number of applicants to roles in the hospitality sector has recently fallen, resulting in businesses struggling to find and retain talent.
• It is clear to many of HOLBA’s members that the considerable media attention towards the struggles of certain sectors, such as hospitality and culture, to attract talent has caused long term reputational damage. This has discouraged young workers from considering careers in these sectors, which will have a major long-term impact on the labour market considering these sectors have played a crucial role in increasing employment during past periods of economic recovery (between 2010-2014 the hospitality industry created one in five new jobs).
• HOLBA welcome the Government’s commitment to reskilling across the economy but are also concerned that the lack of agility in the existing skills system combined with a lack of short-term flexibility in the immigration system risks making the recovery precarious.
• The country faces a complex challenge. On the one hand, the serious labour shortages across the hospitality, social care, food processing, and transport sectors are reaching crisis point. On the other, there is real uncertainty in how the labour market will change now furlough has ended. HOLBA’s asks include:
• Home Office, Department for Education, Department for Work and Pensions, and Department for Business Energy and Industrial Strategy should form a joint strategy on jobs and skills.
• The Government should implement a temporary recovery visa for industries where there is clear evidence of labour and skills shortages.
• Alongside the extended jobs support scheme, as part of this new strategy the Government should consider:
• Devolving National Careers Service funding to create effective Careers Services;
• Increasing powers and funding to support employees from sectors that have suffered the most during COVID-19 via Adult Retraining Schemes; and
• Expanding the apprenticeship system, including by creating Apprenticeship Funds targeted at small firms and sectors most affected by Covid-19.

London’s importance as “gateway to the UK”

• HOLBA believes that the Tourism Recovery Plan does not place enough emphasis on the importance of London as a gateway for international tourists and does not outline any real, tangible commitments, such as an increased marketing budget for the capital.
• With over half of all visitors to the UK visiting the capital, London also plays an important role as a UK ‘brand leader’. The city acts as a gateway, encouraging visitors to explore more of the country and spreading the economic benefits of tourism.
• Whilst other gateway cities like Birmingham and Manchester are important and should receive support to stimulate demand, the completely different scale and importance of the capital’s tourism offering means London should be treated differently and receive targeted investment.
• Research by London & Partners revealed that 15% of London visitors came to London as part of a wider trip to the UK of which 80% went to an English location outside of London, 30% to Scotland, 21% to Wales and 9% to Northern Ireland.

‘Levelling up’ agenda

• A key challenge posed by the ‘levelling up’ agenda is that it risks resources and funding being redirected from the capital to other parts of the country.
• The term ‘levelling up’ is often assumed to be a battle for adequate resources between the North vs South of the UK and this often leads to people assuming that London and the south-east have secured the lion’s share of Government funding over past years, when in fact the city has been generating the tax revenue that is then spent across the country.
• If the Government ensures London recovers quickly and robustly, it will be a strong economic engine for both post-pandemic growth and the government’s commitment to ‘level-up’ across the UK, particularly given the capital’s significant historical fiscal contribution to the UK.
• The economic activity generated in central London’s unique ecosystem – contributing £211bn GVA to the national economy – provides a sizeable proportion of the tax receipts required to level up other parts of the city and the rest of the UK
• London First have calculated that investment in promoting the city and improving transport and skills could yield a benefit of c. £25-35Bn in GVA between 2021-2023, equating to approximately c. £8-12Bn in additional taxes for central government over that period.

Uncompetitive VAT rate

• Whilst the Recovery Plan does mention the UK-wide cut in VAT for the tourism and hospitality sectors from 20% to 5%, it does not consider its impact on international tourism and the competitiveness of the UK’s tourism offering.
• Prior to the pandemic the UK had the second highest rate of VAT on tourism in Europe and was the only European nation which does not apply a reduced rate of tax or special dispensation for tourism services.
• Considering that international visitor numbers are not expected to recover to pre-Covid levels until 2023 at the earliest, the Government should extend the reduced rate of VAT for the rest of 2022.

What should the UK be doing to maintain its status as a ‘soft power superpower’ and further promote its culture and heritage on the global stage? 

What are the biggest threats to the status of ‘soft power superpower’?

Lack of investment

• The £19 million the government has allocated for domestic and international marketing activity for the UK is not enough and is smaller than the individual budgets of some international cities – for example in April 2021 New York launched a $30 million tourism advertising campaign to help the sector recover from the pandemic.
• In a world where every single country is pulling the stops out to promote their offerings it can’t be assumed that the UK’s existing status is enough to speak for itself.
• The arguments for visiting the UK must be constantly made and renewed and promoting what London has to offer is a vital part of that.