Impact of Tourism in the UK Economy

Impact of Tourism in the UK Economy: A Study of Employment Trends in Tourism Sector

Impact of Tourism in the UK Economy: A Study of Employment Trends in Tourism Sector

ABSTRACT

Tourism has been emerging as the fastest growing industry in the UK for the last five years with an annual growth rate of 3.8% per annum. The recent studies show that tourism sector contributes to 9 % of the total GDP of the British economy with an annual income of £127bn. Against the context of the enormous potential of tourism, this study attempts to explore and analyse the economic impact of tourism within the context of the United Kingdom. Since economic impact of tourism involves many direct and induced indicators, the present study selected one of the core aspects of economic impact of tourism, namely employment generation. The economic impact of tourism is also analysed using its contribution to the total GVA (Gross Value Added).  The data for the study are collected from the official statistics of the government of UK and reports of the Travel and Tourism Council that publish basic data on tourism trends every year.  The tourism Satellite Account (TSA) forms main source of data collection.The research shows that tourism sector is emerging as a key player in the growth of UK economy. In terms of GVA contribution and employment, tourism has already bypassed many traditional sectors including IT, Health and manufacturing. Thus, careful analysis of the sector indeed highlights that need for proactive policy framework and implementation that can help the sector to leverage the favourable economic and business environment in the sector.

CHAPTER 1

INTRODUCTION

1.1  Introduction

Tourism is fast emerging as one of the critical components of economic growth and regional development in many countries across the world (World Travel and Tourism Council, 2015).  Tourism generates income and employment, increases positive balance of payments, contributes to Gross Domestic Product (GDP) of the host country and energises supply side activities of tourism sectors (Ivanov & Webster, 2006).  Apart from the direct impact of tourism on economy, there are indirect and stimulated impacts like infrastructural development as well (Ivanov & Webster, 2006).

There is no paucity of literature that highlights the relationship between tourism and economic benefits. Nevertheless, majority of the studies on tourism sector relate the economic impact with rise in GDP alone, ignoring other relevant factors like employment creation (Ivanov & Webster, 2006). It is important to note that the amplifying effects of tourism are much wider than the direct spending of inbound tourists (Tourism Allaince, 2015 ). The recent study of World Travel and Tourism Council shows that, in 2014 alone, globally the total income generated from the sector was US$7.6 trillion (World Travel and Tourism Council, 2015). It is approximately 10% of global GDP. Further the sector contributed to 277 million jobs across the world. The growth rate of the sector is much faster than other key industries like health care, financial services and automobile (Tourism Allaince, 2015 ).

Considering the enormous potential of tourism, this study attempts to explore and analyse the economic impact of tourism within the context of the United Kingdom. Since economic impact of tourism involves many direct and induced indicators, the present study selected one of the core aspects of economic impact of tourism, namely employment generationAccording to the official statistics of government of the UK, tourism is one of the fastest growing industries since 2009 and it has immensely contributed to employment generation (National Statistics , 2015). In fact tourism helped the country to recover from the disastrous effect of economic recession. Between 2009- 2014, almost one third of the new jobs generated in the country were in the tourism sector (Tourism Allaince, 2015 ). Against this context, this research tries to provide an in-depth analysis on the economic impact of tourism in the UK economy with special emphasis on employment generation trends, features and future prospects.

 

1.2 Background of the Study

Tourism has been emerging as the fastest growing industry in the UK for the last five years with an annual growth rate of 3.8% per annum. The recent studies show that tourism sector contributes to 9 % of the total GDP of the British economy with an annual income of £127bn (White, 2016). It is the third largest source of employment in the country with the participation of 9.6 % of the total work force of the UK (Tourism Allaince, 2015 ). While comparing with other key industries, tourism has the second highest growth rate behind the health and education sector (See the Figure1.1) during the period 2010-2015.

According to the reports of the World Economic Forum, the tourism sector in the UK is the fifth most competitive tourist business world over.  The main factor that contributes to the growth of tourism sector in the UK is the enormous expansion of inbound tourism (Paine, 2015). The inflow of international tourists contributed £21bn in 2013 to the GDP in the year 2013 (Paine, 2015).  The major economic impacts of the tourism sector include the following (Tourism Allaince, 2015 ):

  1. Contribute to increase in income of government
  2. Generate employment
  3. Enhances business competitiveness
  4. Foster exports
  5. Promote regional development
  6. Support rural development
  7. Promote infrastructure development

Income from tourism comes from services like accommodation, food and beverages, railway passenger transport, road and air transport operations, cultural activities, sports and recreation, exhibitions and spending on consumer products by the visitors. Besides, tourism is the 7th largest export earner in the UK (Paine, 2015).

While considering the employment aspect of tourism, it is evident that the sector provides employment to 3.1 million people and this rate is growing fast. During the period of 2010-13 the cumulative growth of employment opportunities in this sector was 5.4 % (National Statistics , 2015). The following Table (Table 1.1) shows the main features of employment trends in the UK tourism sector.

Tourism sector in the UK Features
Total number of Business  entities 262,268
Start up business 26,875
Full time workers in sectors 47%
Part time workers 53%
Local people in employment 74%
Inbound visitors 34.8 million

Table 1 Features of tourism in the UK (Tourism Allaince, 2015 )

It is interesting to note that the tourism sector absorbs a large majority of part time and seasonal workers and 74 % of the jobs directly benefit to the local peoples engaged in different activities of tourism sector including accommodation, travel, food and beverages etc. Also, the sector is attracted by new entrants and entrepreneurs as approximately 10.2 % of the total organisations are start ups with less than 2 years of experience in the industry. It shows the future growth prospects of tourism as a profitable business opportunity within the country as UK has emerged as the 8th largest tourist destination in the world (White, 2016).

 

1.2  Relevance of the Study

Even though there are many studies that highlight the economic impact of tourism, there are limited literature that focuses on the employment trends within the tourism sector and the key features of the employment opportunities created by the growth in tourism (Balaguer & Cantavella-Jordá, 2002). Besides, the comparative position of tourism with regards to other key sectors like retail, education, health etc in terms of employment creation has not yet analysed empirically (Balaguer & Cantavella-Jordá, 2002). The existing research on economic impact of tourism mainly emphasises on the GDP growth rate, increase in export, balance of payment etc (Ivanov & Webster, 2006). Therefore the present study attempts to approach the economic impact of tourism in the UK economy with special focus on employment sector. The economic impact of tourism is also analysed using its contribution to the total GVA (Gross Value Added). There are many studies that already established the positive relationship between tourism income and GDP growth (Babcock, 1993). Hence, the current study intends to focus on GVA only.  Apart from that the study intends to analyse the following aspects of employment trends within tourism sector:

  1. The growth in employment during 2010- 2015
  2. The contribution of different industries in creating jobs within the sector
  3. Comparison of employment creation in tourism sector with regard to other key sectors

Since there is dearth of literature covering all these aspect, the current study is relevant for the UK tourism industry in general and business entities in particular.

1.3  Significance of the study

The study is significant mainly for three reasons. Firstly, after the economic recession, it was the sudden growth in tourism sector that helped the country to recover fast (Deloitte , 2013). Though, there is enormous potential in tourism sector as a growth engine for the UK, the internal features of the sector in terms of employment generation is not clear. If we could understand the trends in employment, the industry as well as government can take necessary steps to leverage optimal benefit of the boom in tourism. Secondly, though it is a fact that tourism affects the UK economy positively, it is equally important to understand the most critical services within tourism sector that largely contribute to positive impact on the economy. Thirdly, based on the current trends in employment creation in tourism sector, it is critical to initiative effective policy framework and implementation mechanisms that can help the sector grow much faster. It is expected that the finding of the study would be extremely helpful in understanding and analysing these major issues that affect the future prospects of tourism industry in the UK.

1.4  Research Questions

The main research questions of the study are the following:

  1. What is the impact of tourism in the total GVA of UK?
  2. What are the current trends in employment generation within the tourism sector in the UK?
  3. What is the comparative position of tourism sector in employment generation with regard to retail, health and education and manufacturing?
  4. Which is the most important service that contributes to largest number of employment in tourism sector?

 

1.5  Objectives

The main objective of the study is to evaluate the impact of tourism on the economy of UK, focusing on employment sector. Specific objectives are:

  1. To evaluate the role of tourism in contributing to total GVA since 2010
  2. To analyse the growth trends of employment in tourism sector during 2010- 2014
  3. To compare the employment potential of tourism with regard to other key sectors
  4. To identify the most important services that contribute to growth in employment in the tourism sector

1.6  Hypothesis

Based on the existing research the following hypothesis are developed

H 1:  Tourism is the fastest growing industry during 2010-14 in terms of contribution to total GVA

H 2: Tourism has higher employment potential compared to other key sectors in the UK

H 3: Food and Beverages industry is the highest contributor of employment share in tourism sector and shows fastest rate of growth in terms of employment creation.

1.7  Methodology

The study uses deductive approach with quantitative method. Since the study involves identifying the relationship between different variables and attempts to measure the impact of tourism in the UK economy in general and employment trends in particular, quantitative method is selected as the appropriate methodology. The data for the study are collected from the official statistics of the government of UK and reports of the Travel and Tourism Council that publish basic data on tourism trends every year.  The tourism Satellite Account (TSA) forms main source of data collection. Details of the methodology and research design will be discussed in chapter three of the dissertation.

1.8  Structure of the Dissertation

This dissertation has five chapters. Chapter one introduces the theme and narrates the main objectives, hypothesis and research questions of the study along with the significance and relevance. Second chapter provides a detailed review of existing literature on the topic divided into different thematic headings in accordance with the objectives and research questions. Third chapter explains the methodology, research plan and rationale for following the different steps in research. Fourth chapter analyses the data collected from various sources and discusses the key findings of the study. The last chapter validates hypothesis and highlights the major recommendations of the study.

1.9  Ethical Considerations

The study has been conducted using ethical methods. All sources are given due credit and referenced authentically. Due care was given to interpreting data objectively to avoid the researcher’s own perceptions and opinions. Also, statistical data used in the study are taken from authentic data base and official archives. Secondary materials are selected from books and journals articles published in peer reviewed journals. Information from blogs and Wikipedia are deliberately avoided as it lacks authenticity and objectivity.

 

CHAPTER TWO

LITERATURE REVIEW

2.1  Introduction

This chapter provides the review of existing literature on the topic. Tourism and its socio-economic and cultural impacts always attracted many scholars and hence there is no dearth of literature on tourism studies. Since the focus of the study is impact of tourism on the economy of the UK with special emphasis on employment trends, this literature review is limited to the review of previous studies on the economic impact of tourism and employment related aspects. While analyzing the economic impact of tourism, it is evident that there is no paucity of research on the topic. Using different methodologies, it is widely accepted by scholars that tourism indeed contributes to local economy (Ivanov & Webster, 2006). However, the employment related trends in tourism industry is relatively less, especially in the context of West Europe.

2.2  Economic Impact of Tourism

World over, tourism is regarded as an important policy priority by most of the countries. This is mainly because of the huge economic potential tourism offers to the economic development of the host country (Balaguer & Cantavella-Jordá, 2002). Since tourism is an important driver of economic growth and development, there are many studies that approach the economic analysis of tourism using various methodologies. Loomis and Walsh identified some common methods that are used by scholars in analysing the economic impact of tourism. They are: Economic impact analysis, fiscal impact analysis, financial analysis, demand analysis, cost-benefit analysis, feasibility studies and environmental impact assessment studies (Loomis & Walsh, 1997). The most popular methods used to analyse the impact of tourism on economy are input-output method, income multiplier analysis, Labour creation effect analysis, General Equilibrium model, Social accounting matrix model etc (Choo, 1999). Recently, a new method known as Tourism Satellite Accounting model also emerged (Mazumder et al., 2012).

Most of the studies of tourism attempts to approach the economic impact from direct increase in GDP, increase in exports and favourable balance of payments.  Some of the earlier studies include the study by Archer and Fletcher in the context of Seychelles (Archer & Fletcher, 1996)  and study on the long term impact of tourism in economic growth in the context of Spain by Balaguer et al (Balaguer & Cantavella-Jordá, 2002).In another interesting study, Proenca and Soukiazis assumes that there is direct correlation between the percentage increase in tourism accommodation capacity and regional economic growth in Portugal. They further argued that 1% increase in the hotel capacity of a particular region results in 0.01% increase in the per capita income of the locality (Proença & Soukiazis, 2005).In their study, Loomis and Walsh, (Loomis & Walsh, 1997) identified factors like changes in prices, changes in goods and services and changes in property and other taxes as the key impact of tourism on an economy.

According to Stynes, the economic impact of tourism in an economy can be direct, indirect and induced. Direct impact implies immediate effect of the tourism expenditure. For example, if the number of visitors increases suddenly, it will yield increase in hotel income, tax revenue and other supplies and services (Stynes, 2016).  This is direct impact on economy. Indirect impact means indirect effects on the related industries and activities as result of increase in tourism. For example, as a result of increase in visitors, hotels need more linen and this benefits the suppliers and result in their income. This is an indirect economic impact. Thirdly, induced impact means changes in the economic activity as a result of recurring effect of the direct and indirect impact of tourism. For example, if a vendor of linen who got increased sales due to increase in tourist visitors may spend the extra income on housing, food or consumption of daily items etc. This spending leads to local economic growth and thus can be termed as induced effect of tourism (Stynes, 2016).

In a study conducted among 20 countries, Vallas argues that, apart from direct and indirect economic impacts, tourism also affects other sectors of the economy and thus sectoral impact needs to be added in tourism studies (Vellas, 2011).  He further argues that tourism can play vital role in adjusting the balance of payment problem for developing countries and hence help the countries to escape from financial crisis. Another important contribution of tourism on the basis of the empirical study in 20 countries was the positive effect on reducing poverty and local industries (Vellas, 2011).

In an interesting study on small countries, Brau et al established that tourism can lead to economic growth of small countries compared to manufacturing based countries. During the period between1980-95, tourism focused countries grew much faster than export oriented OECD countries and other less developed countries (Brau et al., 2003).

The multiplier effects of tourism on both rural and urban economy were studied in the context of Denmark by Zhang et al. They argued that economic impact of tourism is more evident in urban context than rural regions in Denmark (Zhang et al., 2007).

The tourist money flow analysis using the spending patterns of both the tourists and industry players was studied by Choo. In this study, he explores how the expenditure was utilised for regional economic growth (Choo, 1999). In a similar study, made in the context of India, it is revealed that tourism led to increase in foreign exchange reserves, generation of tourism and development of infrastructure (Kakkar & Sapna, 2012).

One of the most popular and earliest methods of approaching the impact of tourism is Input-Output model.  Using this model in his study, Harmston, find out that induced effects of tourism is greater than the direct and indirect impact of tourism (Harmston, 1968). In a study using input-output analysis, Kim and Kim studied the income generating effect of tourism in Korean context. The paper finds that in poor countries with low level of infrastructure development, tourism may not lead to substantial gain and instead result in income leakage (Kim & Kim, 1998). However, in recent study, Kim, Chon and Chung studied the economic impact of tourism in South Korea and established that tourism increase tax revenue, employment, overall income and living standard of the people (Kim et al., 2003). There are many similar studies that used input-output model to highlight the positive impact of tourism on economic growth, GDP per capita and regional development including  (Fletcher, 1989), (Archer & Owen, 1971), (Babcock, 1993) and (Yan & Wal, 2002).

The Social Accounting Matrix Model of Tourism incorporates ecological, agricultural and developmental aspects as well. Using this model, West studied the economic impact of tourism in Australia and identified that tourism leads to increase in employment, trade, growth of manufacturing and transport (West, 1993). There are many scholars who used this method to study the multiplier impact of tourism. However, this model was relatively less helpful in measuring the economic consequences of tourism and hence scholars used it along with other models like input- output method (Wagner, 1997).

Recently, the Tourism Satellite Account Model (TSA) became popular in tourism studies. Using this model, Ahlert (2008) studied the impact of tourism on German economy and identified that there is direct relationship between tourism income and growth in GDP, employment, and tax revenue generation (Ahlert, 2008). Other studies in this model include (Blake et al., 2001) and   (Smeral, 2006).

In short, while analysing the vast literature on the impact of tourism on economy, it is evident that in majority of the countries tourism contributed positively in terms of increased GDP, Per capita, regional development, infrastructural development, consumption pattern, employment, multiplier effect on other sectors etc. The following section discusses the impact of tourism in employment.

2.3 Tourism and Employment Generation

One of the most critical aspects of tourism is generation of employment. This is perceived as indirect impact of tourism by many scholars. There is abundance of literature on the impact of tourism on employment generation. Vellas and Becherel argues that it is very difficult to assess the impact of tourism in employment as it has multiplier effect on various sectors including transport, culture, accommodation, food etc (Vellas & Becherel, 1995). Also manufacturing and construction industries are directly and indirectly affected by growth in tourism. Tourism provides direct, indirect and induced employment to people both locally and nationally. The jobs in tourism sector are characterized by the following aspects: seasonal nature, predominance of part time-low paid jobs and labour intensity (Vellas, 2011).

Among the early studies, Liu and Var, identified the multiplier effect of tourism on generating employment in Canadian context and argued that tourism creates employment in accommodation and hotel sector and other related industries (Liu & Var, 1983). In another pioneering research, Archer studied the problem within Mauritius economy and identified that the employment multiplier was 49 per 1 million Rupee spending (Archer & Fletcher, 1996). He argued for tourism specific policies as it has huge potential to generate jobs.

In another earlier study it was found that, in Japan, about 80 jobs were created when 1 million dollar was spent by tourists (Liu & Var, 1983).   Employment aspects of tourism was studied by  Rashid et al in Malaysian context and he identified that the impact of tourism in employment creation is restricted to less than 5 % and it is mainly concentrated in restaurant and hotel industry (Rashid et al., 1993). However, he predicted the steady expansion of employment in coming years. According to Archer, the key impact of tourism is in employment generation. In his study Archer argued that even when other aspects of tourism were negligible in some countries, it could still support large number of people (Archer & Owen, 1971).

Albqami approached the employment creation potential of tourism in Saudi Arabia and estimated that the tourism sector was responsible for 5 % rise in employment within service sector. Besides, the study proves that tourism create direct and indirect employment opportunities (Albqami, 2003). In another interesting study, West established that during the period of 2000-2001, 235,000 new jobs were created in Australia as a result of tourism. The core industrial sectors in which more jobs were created are transport, recreation, trade and manufacturing (West, 1993) Eriksen and Ahmt studied the employment aspect of tourism within Danish countries and identified that foreign tourist visit generated more employment than local tourist visits (Eriksen & Ahmt, 1999).

Another study conducted within the context of Croatia also highlighted the substantial role of tourism in employment creation. The paper further argues that the tourism related jobs are long term jobs and hence contribute to economic sustainability (Pavlic et al., 2013). In Australia, an official study was conducted to determine the micro and macro level employment creation as a result of tourism. The study found that annual growth rate of tourism related employment in Australia during 2009- 11 was 1.4% and share of tourism related jobs is growing faster than other sectors (Tourism Research Australia, 2013).

Bahar and Kozak however argued that even though tourism generates employment, most of the jobs are low paid, part-time and temporary. Besides, they are seasonal as well (Burkart & Medlik, 1981). The seasonality of employment and human resources challenges associated with such jobs is studied by Jolliffe who concluded that there is a need for concrete efforts from government and industry to address the highly seasonal nature of tourism employment (Jolliffe & Farnsworth, 2003).

Another study on tourism relates the employment generation in apart from formal sectors like hotels, restaurants, recreations etc and highlights that tourism creates job in art and handicrafts industry, local entrepreneurship etc (Joe & Farver, 1984). In the context of Bali and Indonesia, Cuckier et al study absolute growth in employment and the spatial distribution of tourism employment (Cuckier & Butler, 1996).

While analysing the literature on tourism and employment it is clearly evident that there is no paucity of studies on employment related aspects of tourism and most of the research focuses on the positive impact of tourism in generating employment. However, there are only few studies that highlight the growth of employment in tourism sector comparing to other key sectors. This study, hence, attempts to approach the problem from the trends in employment in the sector rather than on establishing the linkage between tourism and employment generation.

2.3  Impact of Tourism in the UK

Official reports on tourism in the UK show that tourism played a vital role in helping the country to recover from the crisis created by global financial crisis (Paine, 2015). The economic impact of tourism in regional level was studied by Buccellato et al who concluded that the country lacks an effective method to understand the actual impact of tourism on economy (Buccellato et al., 2010).

One of the important studies that highlight the tourism trends in UK is the Deloltte Study on employment in the UK. This report provides a detailed overview of the contributions of tourism to the economy, job creation and multiplier effects of tourism in the country. The report identifies key drivers of tourism growth in the UK including consumer spending, investment, bilateral exchange rates and overall economic performance (Deloitte , 2013). Another interesting study by Kennel et al analyses the tourism policy of government of the UK and concludes that concrete and interventionist policy can substantially contribute to growth of this sector (Kennel & Chaperon, 2013).  Another key source on UK tourism and employments trend is the annual report of Travel and Tourism Alliance that publishes the emerging trends within the industry. There are more than 20 such reports which clearly depict the future prospects of tourism industry in the UK (Tourism Allaince, 2015 ).

A study by Johnson and Thomas evaluates the economic impact of tourism in major tourist attraction in the north east of England. The study analyses direct, indirect and induced employment in the region as a result of tourism (Johnson & Jacob, 1992). The progress of SME sector under tourism development in the UK has been studied by Noveli who highlighted the role of networks and innovations in the sector (Noveli et al., 2006).In another study, the economic impact of tourism is studied in the context of Bath. The research concluded that tourism created 10 % employment opportunities in Bath which is much higher than the country average of tourism employment in 2001 (Witt, 1987).

Apart from these, there are many studies on tourism in the UK that focus on sustainable tourism, marketing of tourism, entrepreneurship and business opportunities in tourism sector etc.

2.4  Gap in Existing Research

As we have seen, tourism is a well researched area with plenty of materials following different methods and models. In majority of the studies, the positive correlation between tourism and economic gain is established without doubt. There are many studies that proved the direct, indirect and induced impact of tourism on employment, GDP, trade, balance of payment, regional development, economic development etc. In the realm of employment also scholars used multiple methods like Input- Output model, General Equilibrium Model, Social Impact Model etc to measure the effect of tourism on employment sector. In most cases, it is established that tourism creates employment opportunities and contributes to local development. It is equally relevant in the case of the UK as well. There are studies that proved the positive role of tourism in creating employment in the country. In fact many research reports perceive tourism as the key driver of employment generation in the UK in future comparing to other sectors like retail and construction. The rate of growth in employment is faster in the UK compared to other countries (Deloitte , 2013).

Nevertheless, there is still lack of clarity on the nature and trends of jobs created in the sector. Most of the studies on tourism focusses on the impact of the sector in increasing GDP. The contribution of tourism in total GVA is not studies seriously. The GVA is much broader term than GDP. GVA represents the ‘reconciliation of the supply of tourism goods and services and the demand for, or consumption of, these products by tourists. GVA is therefore a measure of the output of tourism industries and other sectors of the economy that is driven directly by the spending of tourists’ (National Statistics , 2015). GVA is a relatively new approach to study the economic impact. Hence, the present study used GVA analysis instead of the contribution of tourism in GDP which is already established by scholars.  Secondly, it is important to understand the relative growth in employment with regards to other sectors like retail, health and manufacturing. Finally, there is paucity of research that focus on the employability of key services within the tourism sector. Hence, the current study attempts to explore these aspects using Tourism Satellite Account data.TSA is a new methodology to approach the impact of tourism studies. Thus, the current study is novel in terms of methodology, objectives and data sources.

 

CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter explains the detailed methodology followed in the study. The approach towards research, research method, research philosophy, data collection and data analysis methods etc are narrated. The rationale for selecting the particular methodology is also explained.

3.2 Research Methodology: Meaning

Research is an enquiry in search of new knowledge and insights on a particular subject. Research is meaningful only when it enriches the existing knowledge in terms of new interpretation, findings and deviation from known facts (Yin, 1999). According to Redman and Mory, research is a “systematized effort to gain new knowledge’ (Redman & Mor, 1923). Research methodology is the objective and systematic methods and procedures that are used in research to find out the answers of the key problem.

According to Saunders et al, there are six main components of research methodology. These are: Research Philosophy, Research Approach, Research Strategy, Choice of method, time horizon and the data collection methods/analysis. These elements are commonly used in management research (Saunders et al., 2007).

3.3 Research Philosophy

There are two types of research philosophy- Positivism and Interpretivism.  The philosophy of research largely influences the methodology and research design. As a paradigm of research, positivism follows the methods of natural science and attempts to observe the problem using measurable facts.  Positivism rejects values in research and highlights factual based and value free approach towards research. The perceptions of the researcher do not influence positivism and it attempts to identify the causal relationship between variables. However, interpretivism is highly value based and perceives social phenomenon as subjective and socially constructed. In this philosophy, individual opinion and preferences of the researcher influences the methods and results as interpretivism is based on interpretations and inferences rather than measurable facts (Veal, 1993).

The proposed research study is designed within the positivist paradigm. The study attempts to analyse the impact of tourism on the economy of UK with special focus on employment trends. Since the study is based on measuring the impact of tourism in terms of exact figures and percentages, it is not value oriented. Rather, the research involves objective analysis of facts. Hence positivism is selected as the philosophy due to the measurable and fact based nature of the problem. The researcher’s observation and preferences have no significant role in this study. Hence, the philosophy of research is positivism.

3.4 Research Approach

This research follows deductive approach. Deductive approach starts from general observations about a particular situation, generate hypothesis about the problem under study and finally tests the validity of the hypothesis using quantitative method. The approach either approves or rejects the existing theory on a particular theme using measurable data. In inductive method, the process is opposite (Saunders et al., 2007). It begins with particular observations and attempts to build concrete theory and broad generalizations about a particular situation. Inductive research is mostly used in exploratory studies.

In this study deductive approach is used mainly because the study involves quantification of measurable data collected from Tourism Satellite Account and other statistical data base. Since there are many studies that established the impact of tourism on employment generation, the study aims to validate the existing theory in the specific context of the UK. Thus, it involves selecting a particular theory, building hypothesis and testing the hypothesis using statistical tools. All this processes are used in the current study. Hence, it is deductive approach.

3.5 Method of Research

There are broadly two approaches to research; Quantitative and qualitative. Quantitative research implies observing a particular problem using measurable and numerical data, mathematical formula and statistical tools. In such studies relationship between variables are analysed using quantitative data. Quantitative techniques focus on accuracy and objectivity (Veal, 1993). Qualitative method on the other hand, relies on attitude, behavioural pattern and inferences of individual or groups. Qualitative methods do not quantify numerical data. Rather this method uses observation and real experiences to understand the nature of a particular phenomenon. Quantitatve research is more structured and formal where as qualitative research is flexible and information. Qualitative study is best suitable to study the social and community behavior of people, consumer perception etc.

In this study, the researcher intends to examine the actual impact of tourism on employment generation in the UK, trends and features of tourism employment since 2010. The data is derived from statistical data base of government of Britain and tourism satellite account. Since the study is using numerical data for analysis and conclusion, this study is quantitative rather than qualitative.

3.6 Data Collection Methods

There are two main sources of data collection in research: Primary and Secondary. Survey and interview schedule are primary sources of data. Books, periodicals, websites, documents etc forms secondary sources of data. The key data used for the study is collected from secondary sources. The study involves two stages.

In the initial stage a detailed review of existing literature is conducted to finalise the scope of the study. For the literature review, secondary data were collected from books, journals and websites. The major books on tourism management with special focus on economic impact were identified from the University library. Since journal papers reflect many of the key insights in tourism research, the researcher used research paper data base as key source of secondary data collection. Apart from google scholar, JSTOR, EBSCO, Willey Online Library, Taylor and Francis online and Elsevier were used for collecting data. Journals like Annals of Tourism Research, Journal of travel Research, Economics and Labour Market Review, International Journal of Tourism Research, International Journal of Urban Research etc   were extremely helpful in identifying papers related to economic impact of tourism in general and employment trends in particular.

Second stage involves analysis of data using the key statistics related to tourism and employment generation in the UK. The following table shows the major sources of data used in the study to establish the main research questions.  The two important sources of data were the website of the Office of National Statistics and the Tourism Satellite Account of 2012. Since the TSA doesn’t have latest data of 2013 and 2014, the researcher used ONS panel data and the study of Deloitte to derive the data on employment trends within tourism.

Data Collected Source
Panel Data on Overseas Tourist Visit to UK 2010-14 Office for National Statistics(ONS), Government of UK
Panel Data on Overseas Tourist Visit to UK in millions Office for National Statistics, Government of UK
Tourism employment in the UK 2010-12 Tourism Satellite Account(TSA), UK
Tourism employment in the UK 2013-14 Tourism Statistics, House of Commons Library
Sectoral details of Employment 2010-2014 Calculated from TSA and ONS statistics
Contribution of Tourism in GVA Calculated using TSA+ ONS
Tourism and Non tourism employments Calculated using TSA+ ONS

Table 2 Source of data

3.6.1 The Tourism Satellite Account Data:

The study mainly used TSA data for analysing the trends in tourism industry. TSA is used because it is the latest method that provides aggregate figures in tourism industry. The TSA allows harmonisation and provides a broader picture of economic aspect of tourism. It also provides accurate data on tourism based direct GDP as well. The TSA provides 10 integrated tables related to tourism impact. They are: inbound and outbound tourism expenditure, internal tourism expenditure, production accounts of tourism industries, the Gross Value Added and Gross Domestic Product attributed to tourism, employment, investment, government consumption and non-monetary indictors (World Tourism Organization Network, 2016). Among these, the current study selected GVA and employment related data pertaining to the period 2010-2014. The following figure explains the key variables used in the TSA to measure the impact of tourism in an economy.

TSA is better than traditional methods of measuring tourism impact mainly because of the monetary value it adds to the contribution of tourism where as the traditional methods calculate tourism on the basis of flow of tourists alone. For example, while the traditional method focuses only on contribution of tourism on aggregate GDP of the country, the TSA uses Gross Value Added to the Economy. GVA is a broader variable than GDP. The tourism direct GVA implies ‘the reconciliation of the supply of tourism goods and services and the demand for, or consumption of, these products by tourists. TDGVA is therefore a measure of the output of tourism industries and other sectors of the economy that is driven directly by the spending of tourists’ (National Statistics , 2015). This study also uses GVA along with GDP to analyse the impact of tourism on economy and employment.

3.7 Data Analysis

The main objective of the study is to evaluate the impact of tourism on the economy of UK, focusing on employment sector. Within this broad objective, the emphasis of the research is on analysing the employment trends in tourism industry during 2010-14. The period is selected because there are many studies that highlight the role of tourism in helping the economy to recover the economic recession of 2008-2009. Hence, the five year period after the recession is selected for in-depth analysis. The three key important aspects of employment trends are analysed in the study. They are:

  1. Contribution of Tourism in total GVA
  2. Growth of employment in tourism sector and its relationship
  3. Comparing the growth in tourism employment with regard to retail, manufacturing and health sectors
  4. Identifying the most important sub-sector that predominantly contributes to employment in tourism sector.

The analysis on the contribution of tourism on total GVA was conducted using basic statistical tools correlation method. In correlation analysis the primary objective is to measure the strength or degree of linear relationship between two variables, Karl Pearson developed formulae called correlation coefficient. It is simply denoted as “r” or “R”. The correlation coefficient between two random variables X and Y are usually denoted as r(X, Y) and it is defined by,

                                       r(X, Y) =

Where Cov(X, Y) is the covariance between X and Y, and   is the standard deviation of X and Y respectively. Also the value of correlation coefficient is lies between -1 and 1. If the value of r(X,Y) is -1 then we say that the variables are strictly negative correlated, if the value is 1 , then we can say that the variables are strictly positive correlated and the value zero indicates that there is no correlation between the variables.

3.8 Variable used in the Study

To analyse the impact of Tourism on economy, the following variables are used:

  1. Dependent variable: Change in GVA
  2. Independent Variables: Contribution of GVA  from tourism industries  and Contribution of GVA from Non-tourism industries

To analyse the impact of tourism in employment the following variables are used:

  1. Dependent variable: Employment in tourism
  2. Independent variables: Employment rate in tourism sector and employment rate in non-tourism sectors

The analysis was conducted using statistical tools. The following chapter provided detailed explanation of the process.

3.9 Summary of Research Methodology

The chapter explained the key methodologies used in the study. To sum up the research is basically a quantitative study using statistical tools to analyse the impact of tourism on the economy with special emphasis on employment trends. The following figure summarises the research design of the study.

Impact of Tourism in the UK Economy: A Study of Employment Trends in Tourism Sector
Impact of Tourism in the UK Economy: A Study of Employment Trends in Tourism Sector

3.10 Ethical Considerations

The research adhered to all the ethical practices need to be followed in academic field. The data used in the study is derived from authentic sources alone. The literature review was conducted using peer reviewed journals and books. All sources were properly cited. The statistical data was derived from official website of government of statistics, United Kingdom and the latest report of the Tourism Satellite Account. All the figures used in the study are taken from time series data on tourism and leisure. The findings and analysis of the study is original and based on the calculations derived from the data.

CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION

4.1 Introduction

The chapter presents the analysis of data pertaining to the economic impact of tourism in the UK with special emphasis on employment trends. The data used for the study is derived from Panel data on employment from the official statistics of government of the UK and the data base of Tourism Satellite Account, the authentic aggregate data base on tourism trends across the world.

The data analysis process has two steps in accordance with the main objectives of the research study. Firstly, the research intends to explore and analyse the impact of tourism on the economy of the UK. In this aspect, the current research selected only one variable for in-depth analysis- contribution of tourism income to GVA in comparison with other sector during the selected period of 2010-2014. Here, instead of GDP, Gross Value Added is used as the variable as it reflects broader view of the impact of tourism on economy. The study is limited to calculating the share of tourism income on total GVA of the country. The aim is to reflect upon the significance of tourism as a key growth driver in the UK economy.

In the second stage, the study analyses the trends in employment using TSA data set. There are mainly three aspects. First of all, the trend in tourism sector employment is analysed using panel data. Secondly, this trend is compared with non-tourism sector employment in the UK within the same period. Thirdly, attempt is made to analyse the key sub-sector within tourism that provide highest employment potential during the selected period. The following section would present the detailed data analysis and discussion based on the research.

4.2 Impact of Tourism on the Economy: The GVA effect

The TSA data and the government of UK statistics clearly show that the contribution of tourism is increasing since 1980. As per the panel data, the number of inbound tourists increased by 177% from 12.4 million visits in 1980 to 34.4 million visits in 2014 (National Statistics , 2015). The following figure reflects the increase in number of tourists during the period between 2010- 14. The data is derived from International passenger survey.

From the figure, it is clearly evident that there is substantial increase in number of tourists since 2010. Though the rise in inbound tourism was initially marginal, it began to rise especially after 2012. There is an increase of 4567 million tourists from different countries during the period between 2010 and 2014. Thus, there is approximately 15.35% rise in number of tourists during the selected period. The contribution of these inbound tourists indeed played a key role in contributing to total income from tourism.

While considering the income from tourism related activities, it is evident that tourism is one of the fastest growing sectors in terms of contribution to total income and GVA. The following figure explains this better. From the figure it is clear that there is increase in income gained from the increase in tourists since 2010. There is approximately 30.74 % increase in the income from outbound tourists during this period. Thus, it is interesting to note that while the rise in number of tourist is 15. 35% during the selected period, the increase in the income from tourists is almost double-30.74%. Naturally we can assume that the increasing income from tourism will contribute to total GVA in the economy as well.

Based on the TSA data, the GVA from tourism increased since 2010 and this was relatively higher than other sectors of the economy. The following figure explains the growth in GVA contribution to the economy of the UK. It must be noted here that the current study involves only direct effect of tourism on GVA. Indirect and induced effects of tourism on economy have not calculated. Direct Tourism GVA implies the measure of the output of tourism industries and other sectors of the economy that is driven directly by the spending of tourists.

The figure shows that the direct GVA from tourism increased substantially during 2011- 2012 but slightly declined in 2013. And after that it began to improve again. In percentage terms, it is measured that the increase in GVA during 2010-14 is 8.6%, 4.9% -0.2 % and 1.7 respectively. The following figure reflects the percentage change in contribution of direct tourism income towards the GVA of the country.

The TSA estimates further shows that the decline in total GVA after 2012 is mainly due to the low performance of food and beverages industries that contribute in much of the value in this sector. Though the total GVA of tourism is not rising in accordance with the increase in income and increase in number of passengers during the same period, the performance of the sector is far better than other key industries in the country.

The following Table explains the comparative position of tourism sector in terms of its contribution to total GVA. From the figure below, we can assume that the share of tourism in GVA is better than other key industries like IT and retail. The sector stands third position after real estate and health and education. Since health and education involves huge government spending as well, we can say that tourism has emerged in the UK as one of the key determinants of future economic growth. This is evident particularly after the recession.  Though the financial sector growth is negative and IT sector grow at a slower pace, tourism has not affected much. Hence, this can be a priority sector considering the number of visitors, huge increase in their spending and corresponding income and finally the overall contribution to GVA of the country.

The relative importance of tourism in the contribution of GVA is calculated using correlation analysis.

4.2.1 Correlation Analysis GVA and Tourism

 Correlations
GVA Income from Non-tourism
GVA Pearson Correlation 1 .849
Sig. (2-tailed) .069
N 5 5
Non-tourism characteristic activities Pearson Correlation .849 1
Sig. (2-tailed) .069
N 5 5

Table 3 Correlation Analysis

 

Correlations

GVA Income from tourism
GVA Pearson Correlation 1 .977**
Sig. (2-tailed) .004
N 5 5
Income from tourism Pearson Correlation .977** 1
Sig. (2-tailed) .004
N 5 5
**. Correlation is significant at the 0.01 level (2-tailed).

Table 4 Correlation tourism

In correlation analysis the primary objective is to measure the strength or degree of linear relationship between two variables, Karl Pearson developed formulae called correlation coefficient. It is simply denoted as “r” or “R”. The correlation coefficient between two random variables X and Y are usually denoted as r(X, Y) and it is defined by,

                                       r(X, Y) =

Where Cov(X, Y) is the covariance between X and Y, and   is the standard deviation of X and Y respectively. Also the value of correlation coefficient is lies between -1 and 1. If the value of r(X,Y) is -1 then we say that the variables are strictly negative correlated, if the value is 1, then we say that the variables are strictly positive correlated and the value zero indicates that there is no correlation between the variables.

From the table we get the correlation coefficient R is .849 (non- tourism) and .977 (from tourism). The high R value indicates that contribution from the tourism sector is higher than that of income from the non-tourism sector while comparing to the total GVA.

4.3 Impact of Tourism on Employment

Since the role of tourism in the economy of UK as a key driving factor of future growth is evident from the TSA and International Passenger Survey data, this section attempts to analyse the employment potential of tourism sector during the period selected.

The tourism sector in the UK employs more than 3 million people. Tourism is the third largest sector providing 9.6 % of total employment in the UK. Also, comparing to other industries the growth rate in employment potential is higher than other industries. The section analyses three main aspects of tourism and employment in the UK. Firstly the growth trends in tourism employment are calculated using TSA data. Secondly the sectoral contribution of employment is measured using the same data set. Thirdly, the growth rate in tourism employment compared to non tourism sectors using TSA data.

4.3.1 Growth trends in Tourism employment

The figure clearly shows that there is huge increase in tourism sector employment since 2010. The growth rate in employment during this period is 8.75%.  In other industries, the cumulative growth rate in employment is only 3.42 %.  In the period between 2013- 2014 alone, the growth rate of employment in tourism was 3.74 %.  Within the sector, the growth rate was relatively high in food and beverages followed by accommodation. The following figure shows the growth rate of tourism industry as per the sub-sectors.

From the figure we can understand that the cumulative growth rate during the period is highest in food and beverages industry followed by accommodation. Passenger transport related industries shows slowest rate of growth during this period.

4.3.2 Tourism Sector Employment and Non-tourism sector Employment: Comparison

One of the key objectives of the study is to understand the share of tourism in total employment in comparison with non-tourism industries. Previous studies show that tourism is the fastest growing sector in terms of employment creation since 2010 (Deloitte , 2013). While other sectors faces serious crisis after the global economic crisis, it was tourism sector that still contributed to employment (Tourism Allaince, 2015 ). The following table attempts to analyse these claims on the basis of the data derived from the TSA.  The data analysis shows that while the growth rate of tourism sector employment is 8.75 % the growth rate in non-tourism sector is only 3.42 %.

year Employment in  tourism related industries Employment Non-Tourism  activities Growth Rate of Tourism employment Growth Rate of Non-Tourism sector employment
2010 456333 4265132
2011 466985 4262967 2.33426 -0.05076
2012 468385 4247114 0.299795 -0.37188
2013 479605 4306840 2.395465 1.406273
2014 497554 4412681 3.742455 2.457509
Total 8.75 3.42

Table 5Tourism and Non tourism employment

The table shows that growth rate in tourism employment is growing faster than non-tourism sector. Even when the non-tourism sectors reflected negative growth in terms of employment creation, tourism was able to create jobs in the economy. During 2010-11, non-tourism sectors didn’t create new employment opportunity at all. Earlier studies also confirmed that soon after the economic recession, when other sectors of the economy failed to perform better, it was tourism sector that saved the UK from crisis. The table (Table 5) above provides evidence to this claim. This bright prospect of tourism is the critical factor that necessitates further policy priorities to encourage tourism sector in the UK.

Figure 12Employment growth rate: Tourism & Non tourism

Now, when we compare the employment potential of tourism with regard to other key sectors like manufacturing, retail, education and health, it is evident that the tourism industry performs slightly better than other sector in terms of employment growth. The following table (Table6) explains this clearly. Based on the TSA and official statistics of government of the UK, the employment share of some important sectors is calculated. The employment share of each sector in total employment during the last 5 years shows that in many sectors the growth rate is either negligible or stagnant. The following table (Table 6) shows this very clearly.

    Year Manufacturing Wholesale & retail trade Education Human health & social work activities All Other jobs  

Tourism Jobs

2010 5.6 10.6 5.9 8.9 58.9 10.1
2011 5.5 10.5 6.1 8.8 58.9 10.2
2012 5.5 10.4 6.0 8.8 59.1 10.2
2013 5.4 10.2 6.06 8.8 59.4 10.3
2014 5.4 10.1 6. 1 8.8 59.3 10.4
   

Table 6 Employment share of key sectors

From the table it is evident that the share of manufacturing sector in total employment is showing a declining trend since 2010. This is similar in the case of retail and wholesale trade. Education shows an upward trend as the sector contributes to 6.1% of the total employment in 2014 where as it was 5.9 % in 2010. Health and Social sector is almost stagnant in creating jobs as the share of health in total employment was 8.8 % in 2010 and 2014 respectively. Contrary to these, tourism sector is showing steady growth rate in creating employment though the pace is not fast.  The boom in tourism sector employment is more visible after 2012. The last two years witnessed substantial increase in tourism sector jobs and the sector now contributed 10. 4% of the total employment share. Thus, it is evident that tourism is one of the key promising sectors in terms of provision of employment.

4.3.3 Share of major tourism industries in Employment: Trends

The third key objective of the research is to identify the core industries that contribute to the growth in employment creation within tourism. The main industries within tourism sector are food and beverages, accommodation, cultural and recreational activities and transport and travel agents. Among these sectors, food and beverages industry is the largest contributor of both income and employment followed by cultural and recreational activities. However, during the selected period, the growth rate of employment in cultural and recreational activities and travel agencies is showing declining trend. At the same time, even though the contribution of accommodation industry in terms of total employment is relatively less, this industry is showing fastest growth rate for the last five years.

The following table reflects this trend. From the table it is evident that the accommodation industry reflects highest growth rate (1.74%) during the period followed by the food and beverages industry that showed 1.1 % growth. At the same time the growth in culture and recreation industry is negative as it declined at the rate of -2.2 %. Transport and travel agency industry also shows declining trend in creating employment.  Thus, it is evident that during the last five years, there is substantial transformation in tourism industry and the traditional sectors that generated more opportunities are bypassed by new industries. It can be thus expected that the accommodation and hotel industry in the UK will absorb more people in the coming years.

Year Food and beverage transport, travel agencies, Cultural, sports, recreation and activities  

 

Accommodation

Others
2010 41.8 11.15 26.9 11.3 8.85
2011 42.01 11.53 26.6 12.7 7.16
2012 42.8 10.9 25.8 12.8 7.7
2013 41.6 10.6 26.1 12.8 8.72
2014 42.9 10.7 24.7 13.04 8.66
Growth rate 2010-14  

+1.1

 

-0.45

 

-2.2

 

+1.74

 

+0.19

Table 7 Share of Tourism industries in employment

4.4 Major Findings of the Study

Based on the data analysis, the key findings of the study can be summarised as following:

  1. Tourism is one the key drivers of the UK economy in terms of income generation and employment creation. The literature review, data analysis and correlation analysis confirm to the relative importance of tourism as the emerging growth determinant in the UK. This is particularly relevant when we consider the stagnant growth in other sectors. This finding corresponds to the earlier studies on tourism that relates it with economic growth, GDP per capita and GVA (Fletcher, 1989), (Archer & Owen, 1971), (Babcock, 1993) and (Yan & Wal, 2002).
  2. There is 15.35% rise in number of tourists during the selected period. The contribution of these inbound tourists indeed played a key role in contributing to total income from tourism.
  3. There is approximately 30.74 % increase in the income from outbound tourists between 2010 and 2014. Thus, it is interesting to note that while the rise in number of tourist is 15. 35% during the selected period, the increase in the income from tourists is almost double-30.74%. The increasing income from tourism has contributed to total GVA in the economy as well.
  4. Though the total GVA of tourism is not rising in accordance with the increase in income and increase in number of passengers during the same period, the performance of the sector is far better than other key industries in the country.
  5. The growth rate of tourism GVA is better than other key industries like IT and retail. The sector stands third position after real estate and health and education.
  6. Though the financial sector growth is negative and IT sector grow at a slower pace, tourism has not affected much. Hence, this can be a priority sector considering the number of visitors, huge increase in their spending and corresponding income and finally the overall contribution to GVA of the country.
  7. In correlation analysis, the high R value indicates that contribution from the tourism sector is higher than that of income from the non-tourism sector while comparing to the total GVA.
  8. The growth rate in employment in tourism sector is far ahead of other sectors. The employment growth rate during this period is 8.75%. In other industries, the cumulative growth rate in employment is only 3.42 %.
  9. Tourism sector is showing steady growth rate in creating employment though the pace is not fast. The boom in tourism sector employment is more visible after 2012. The last two years witnessed substantial increase in tourism sector jobs and the sector now contributed 10. 4% of the total employment share. Thus, it is evident that tourism is one of the key promising sectors in terms of provision of employment.
  10. Among the key industrial sectors within tourism, food and beverages contributes to highest share of employment followed by culture and recreation activities. However, in terms of growth rate, the accommodation industry is growing at a faster pace than other sectors. While growth rate in accommodation industry is 1.74 %, in food beverages, it is 1.1 % only. Other key industries show negative growth in providing employment. Hence, in future both food and accommodation industries will be key drivers of growth in tourism sector.

4.5 Conclusion

From the above analysis, it is evident that tourism sector is emerging as a key player in the growth of UK economy. In terms of GVA contribution and employment, tourism has already bypassed many traditional sectors including IT, Health and manufacturing. Thus, careful analysis of the sector indeed highlights that need for proactive policy framework and implementation that can help the sector to leverage the favourable economic and business environment in the sector.

CHAPTER FIVE

CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

In the previous chapters, we have seen the main contributions of tourism sector in the economy of the UK and its importance as key driver of economic growth and employment promotion. The study established that tourism has a slight edge over non-tourism industries in promoting economic growth and employment opportunities. This chapter attempts to validate the main hypothesis of the study based on the data analysed. Further, the chapter also suggest policy recommendations for tourism development in the country and major limitations of the study.

5.2 Validating Hypothesis

Since the study used inductive methodology that relies on testing hypothesis and existing theories a modest attempt is made to validate the main hypothesis on which the thesis was built.

H 1: Tourism is the fastest growing sector during 2010-14 in terms of contribution to total GVA

The # first hypothesis of the study was the assumption that tourism is the fastest growing -+i

0ndustry in terms of its contribution to total GVA during the selected period. While comparing the GVA of tourism with other industries like retail, Real estate, IT, Health and education, it is evident that tourism is not the fastest growing industry as claimed by some industry reports. Real estate shows 30 % contribution of total GVA followed by health and education which shows 15.1 % contribution to GVA. Tourism is the third largest contributor of GVA and the growth rate of tourism in relation to non-tourism sectors in terms of total GVA is established through correlation analysis. Thus, from the empirical analysis, we couldn’t find any substantiate data to establish that tourism is the fastest growing sector in terms of contribution to total GVA. In contrast, it is emerged that tourism is the third largest sector behind real estate and health and education. Hence, while comparing the tourism sector with non-tourism sectors as a whole, it is evident that comparing to non-tourism sectors taken together, the share of tourism in GVA is higher than non-tourism sectors. However, when we take sector wise, tourism does not enjoy the position of fastest growing sector. Rather, it is the third fastest growing sector in UK while taking the contribution to GVA. Hence, the first hypothesis is not validated in the study.

 H 2: Tourism has higher employment potential compared to other key service sector industries in the UK

The main objective and emphasis of the study is to identify the employment potential of tourism in comparison to other sectors. In the study, this hypothesis was tested using the TSA and the Panel data of the UK government on employment numbers within different industries and sectors. From the study, it is derived that the growth rate in tourism is far ahead of non-tourism sectors in terms of employment creation. While in the non-tourism sectors the cumulative growth rate in employment is 3.42 % only, in tourism sector, it is 8.75 %. Besides, it is the third largest employment provider with an overall employment of more than 3.1 million in 2014.  Even the sectors like health and education which are ahead of tourism sector in their contribution towards total GVA, do not reflect such employment potential as compared to tourism sector. The employment potential of health, education and manufacturing reflect stagnant growth rate in creating employment while tourism consistently absorb sizable number of people. Therefore, the second hypothesis is validated by the study.       

H 3: Food and Beverages industry is the highest contributor of employment share in tourism sector and shows fastest rate of growth in terms of employment creation.

The third hypothesis of the study is about the contribution of tourism industries in providing employment.  From the analysis of TSA data, it is evident that food and beverages industry is the highest contributor of tourism employment with a total share of 42.9% in 2014.The growth in employment in this sector during the selected period is 1.1%. The second important contributor is cultural and recreational activities sector followed by travel and transport sector. Nevertheless, recently accommodation industry is emerging as a key industry within tourism. Though the percentage share of accommodation in total employment is 13.4 % which is relatively less than the food and beverages sector, the growth rate in this industry is ahead of all other sub sectors within tourism.  The cumulative growth rate in accommodation industry jobs is 1.74 % while in food and beverages, it is only 1.1 %. Thus, we can conclude that the third hypothesis is only partially validated in the study. Food and beverage sector indeed is the highest contributor of employment share in tourism. But in terms of growth rate, accommodation reflects fastest growth.  

5.3 Major Policy Recommendations

This study established the positive relationship between tourism and employment sector in the UK.  While considering the significance of tourism sector in contributing to the total GVA of the country and fostering numerous employment opportunities, it is critical to invest in key sectors of tourism for leveraging the future growth prospects of the industry. As shown in the research, tourism is fast growing as a key sector bypassing IT, Retail and manufacturing. The share of tourism in total income and GVA is growing at a faster rate than other sectors. Hence, realizing the potential of the industry, government should invest in the industry through incentives, tax reductions and investment in infrastructure and accommodation. A long term growth strategy emphasizing on the promotion of tourism destinations and fostering the inbound tourist flow would certainly help the industry develop further.

5.4 Limitations of the Study

The study is a modest attempt to analyse the role of tourism sector in the UK economy with special emphasis on employment. Though efforts were made to measure the impact as accurately as possible, the methodology and analysis is not perfect. There are many approaches to study the economic impact of tourism and different models were developed. In this research, TSA approach is used as it is one of the most comprehensive approaches towards tourism sector growth. There is scope for using input-output analysis and Multiplier effect analysis which could have reflected the critical role of tourism better than this simple basic model.

REFLECTION – UK Economy Tourism

When I selected the topic of research, my intention was to measure the actual impact of tourism on the economy of UK with special emphasis on employment sector. From the preliminary literature review and the previous research reports of various agencies, I got an impression that tourism is the fastest growing sector in the UK after the economic recession. Hence I began my research process with that assumption. Initially I wanted to analyse the impact of tourism on the GDP. But during the process of literature review, I could realise that the positive correlation between tourism and GDP growth is already well established. Hence, I selected the share of tourism on total Gross Value Added (GVA) as GVA is a new concept to understand the broader contribution of specific sector on economy. For calculating GVA I selected the method used by TSA. But this stage was really challenging. There was mismatch between the tourism related statistics provided by TSA, Tourism Alliance Council, International Passenger Survey and studies conducted by the private corporate agencies. The mismatch mainly originated through the methodology on which they calculated the number of tourists, income, spending, consumption etc. Some reports and studies measured tourism only in terms of direct tourist contributions where as TSA calculated the indirect and induced effects as well. Considering the broader aspects I mainly used TSA statistics. However, the latest data was not available in TSA. Therefore, I selected the period 2010- 2014 to avoid mixing of data. For the data analysis, I didn’t use any of the secondary reports produced on the basis of the same data set because of the contradictions in their methodology. Hence I relied on the panel data of government of the UK and TSA and calculated the sectoral share in GVA and contribution of tourism in employment.

While doing research, I felt that the study would have meaningful if I could calculate the internal trends in employment like number of full time jobs, part- time jobs and seasonality of employment so that the realistic picture of the claims of tourism industry can be revealed. But that will enlarge the scope of the research too broad. The age and gender aspect of the tourism employment would be interesting as well. But understanding the scope of different data set and reason for the contradictory results in various reports took most of my time in this research. So I preferred to focus only on the core variables.  While looking back, I admit that it is just a preliminary attempt and modest approach to analyse the impact of tourism on the economy of UK. The real impact of tourism on employment would be clear only if we study the nature of employment the sector provides. From the current study, I could establish that tourism is the fastest growing sector in terms of employment generation. But does the job created in the sector sustainable? Do the jobs absorb all sections of people? Do the jobs are distributed evenly? Unfortunately, these questions are beyond the scope of my current research. So I strongly feel that these aspects should be explored in future using the TSA model.

Share this Post