The UK has been fortunate in enjoying an increase in foreign tourist spending, fuelled in part by the relative weakness of sterling against many of the world’s currencies.  The primary reason for the drop in overseas spending has been the very weak economic outlook at home, which is likely to become much worse as government spending cuts mean greater economic gloom and a tightening of domestic expenditures.

One further reason for the drop in overseas spending was as a consequence of the volcanic eruption which took place in Iceland.  The resulting cloud of volcanic ash caused widespread disruption to air travel over most of Europe and air travel was halted for the UK for a considerable period of time.
The cut in UK spending abroad does mask the underlying trend of an increase in the numbers of people taking holidays abroad.

The breakdown of the geographical areas and purpose of visits for the year to July 31st, 2010 is below:

•    Visits abroad by UK residents dropped from 62.4 million to 55.9 million (a decrease of 10.42%);
•    Visits to North America decreased to 3.4 million from 3.9 million (a decrease of 12.8%);
•    Visits to Europe dropped to 43.7 million from 49.2 million (a decrease of 11%);
•    Visits to other world destinations decreased to 8.8 million from 9.2 million (a decrease of 4%)

Overseas business trips dropped by 17%, a sad reflection on the economic state of affairs, while overseas holidays dropped by 10% and overseas trips for meeting family and friends abroad dropped by 7%.

The number of visits to the UK from overseas residents also dropped to 29.5 million from 30.2 million (a decline of 2%), however the level of spending in the UK rose by 4%, which underlines the relative weakness of sterling against many major world currencies.  The number of US visitors accounts for a large proportion of the fall in the number of visits to the UK, and this is a reflection on the global weakness of the US dollar against virtually every major currency, including a weakened sterling.

The outlook for the forthcoming year does look more positive.  Sterling is likely to weaken further against all of the major currencies, including the Euro and the US dollar.  Massive government spending cuts are set to be implemented by the newly elected Conservatives, and this in turn is going to contribute to depressed economic growth while union unrest has elevated the threat of industrial strikes. 

A weakened sterling is going to attract more visitors from overseas because they will be able to make their money go even further as they need less domestic currency to buy British pounds.  A weakened sterling will also mean that overseas travel for UK residents will become less attractive as their pounds will buy less foreign currency, which may be good news for the domestic tourist industry too.