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Air travel chaos and cost of living worries have spurred a surge in bookings by Britons for domestic summer holidays, offering hope to a sector struggling with financial pressures and a worsening economic outlook.
UK domestic holiday businesses had feared 2022 would spell an end to the summer staycation boom of the pandemic’s first two years, when onerous travel restrictions and fears of catching Covid-19 deterred holidaymakers from international travel.
But inquiries and late bookings for domestic summer holidays have jumped since early June, after flight cancellations caused major travel disruption during the school half-term holiday and balmy weather swept across the country.
Last-minute bookings for summer holiday accommodation from Sykes Holiday Cottages, one of the UK’s leading holiday rental agencies, were up 22 per cent at the start of June, compared with the same period last year.
Just under 40 per cent of Britons said they were more likely to choose a domestic holiday instead of an overseas break than before the pandemic, according to polling conducted in mid-June and published on Friday by VisitBritain, the UK’s tourist board.
Of those choosing a staycation, 65 per cent told VisitBritain it was because UK breaks were easier to plan, 54 per cent said they wanted to avoid long queues at airports and the risk of cancelled flights, and 47 per cent said it was because UK holidays were more affordable.
“Whether families think they can’t afford a summer getaway abroad, or they’ve had their flights cancelled, or the potential of sitting with four kids for 12 hours in the airport has just scared them off, many are opting to stay at home,” said Sir David Michels, president of the Tourism Alliance, a lobby group. “That’s a net-positive for the UK tourism industry.”
Michels said he did not expect demand for domestic holidays this summer to surpass the heights of summer 2021, but it was possible levels of demand could mirror last year.
He added that sterling’s depreciation this year “certainly wouldn’t hurt” the domestic market as it would “put some people off” travelling overseas. The currency is down 9.3 per cent against the dollar and 2.2 per cent against the euro since the start of 2022.
Cottage bookings on Awaze, a vacation rental company, for June were flat compared with 2021 and up 21 per cent on 2019, while bookings for August this year were 6 per cent higher than the same month last year and 46 per cent up on 2019. July was slightly down on 2021 levels.
Graham Donoghue, chief executive of Sykes Holiday Cottages, said the UK was “continuing to ride the staycation wave despite the return of foreign travel”.
“Uncertainty around Covid restrictions has seemingly been replaced with another worry — overseas travel disruption — while an increased pressure on household budgets is leading to many turning to staycations as the better value option,” explained Donoghue.
On Thursday, British Airways check-in staff voted to strike later in the summer over pay, setting the stage for yet more air travel disruption.
Henrik Kjellberg, Awaze chief executive, said the travel chaos had “benefited” the domestic tourism market as holidaymakers looked to “avoid the stress and hassle” of overcrowded airports.
He said people had been “introduced to the charms of staycations” during the pandemic and they were “here to stay”, adding that pandemic travel restrictions had combined with a “gradual trend of people thinking more and more about their CO₂ footprint” to encourage more families to consider holidaying locally.
Meanwhile, members of the trade body UKHospitality reported a 20-30 per cent uplift in inquiries over the platinum jubilee weekend in early June from customers searching for holidays in late summer or over the school half-term holiday in October, according to Kate Nicholls, chief executive.
Nicholls said the extension of the staycation boom would provide a lifeline for independent businesses, which have been hit hardest by cost pressures resulting from supply chain issues and the war in Ukraine.
“British holidaymakers will tend to go for the less obvious options,” said Nicholls. “There’s a proportion of customers who will always go branded, but there is also a proportion of domestic visitors who are much more confident about going off the beaten track and looking for independents, looking for boutique options.”
The success of domestic tourism has become more significant because inbound tourism is not expected to rebound to pre-pandemic levels until 2025.
The task for the industry now is to convince British holidaymakers to keep returning in future summers. “If the sun keeps shining, I think it’s going to be a much fuller UK with UK residents than summers before the pandemic,” said Michels. “We’ve now had three years of lots of people holidaying at home. I don’t think this is going away.”
“The longer this trend lasts, the stickier those habits become and the more beneficial it will be for communities across the country,” said Nicholls.
Ajay Rajadhyaksha is global chair of research at Barclays.
Financial markets trade on narratives. And for the past several weeks, the dominant story in both bond and equity markets has been that the Fed will pivot, and soon. Investors expect a rapidly weakening economy to force the US central bank to do an about-turn, and cut rates barely months after hikes finish.
This belief built up a head of steam across July, with many investors suggesting that the Fed could signal a shift at its Jackson Hole retreat in late August. Every weak housing data point fed into this narrative; every contraction in PMI was grist for this mill. A sharp pullback in commodities prices, a collapse in business and consumer confidence, a decline in market expectations for inflation over the next decade – all these pointed in that same direction. And then there was history: the Fed did a volte-face in both of the last two hiking cycles. Hikes in the summer of 2007 gave way to cuts in 2008. And memorably, the Fed hiked in December 2018 only to change course by January 2019. Small wonder that markets have been waiting for the US central bank to signal a shift again.
Easier said than done.
The data that matter most – inflation and wages – are still too strong for the US central bank to breathe easy. Way too strong. And the numbers are accelerating, even before July’s strong jobs report. Consider the last inflation print. Core CPI (which excludes food and energy prices) over 6 months is running at an annualised pace of almost 7 per cent. But the 3-month rate is almost 8 per cent. And the 1-month number annualised is nearly 9 per cent. That means core CPI is speeding up, not slowing down, and is in a very different zip code than the Fed’s 2-per-cent target.
Even more important is the move in wages. For the past few months, it looked like wage growth was slowing down. Average hourly earnings, reported in the monthly jobs report, seemed to have settled into a 3.5- to 4-per-cent annual rate. Then three things happened all at once. First, the Atlanta Fed wage growth tracker showed that wages accelerated strongly in June (6.7 per cent annually):
Second, the average hourly earnings data were revised upwards. Lo and behold, wages are no longer slowing in that series.
But most significant was the latest release of the Employment Cost Index (ECI), the Fed’s preferred indicator. Private sector wages accelerated sharply to a 6.5-per-cent annualised pace in June. The cherry on the cake, of course, was the unemployment rate reaching a post-Covid low last week. The US labour market is not just not slowing down. It is speeding up.
It is true that labour markets are famously backward looking. In September 2008, around the financial crisis, the jobless rate was still 6.1 per cent. When it peaked at 9.9 per cent a year and a half later, the US was well on its way to recovery. Even so, Fed officials care deeply about wages. If high wage expectations get embedded in an economy, high inflation can remain ‘sticky’ for far longer. A 2-per-cent inflation target is hard to achieve if per-capita wages rise 6 per cent in 2023. Central bankers don’t like admitting it, but a primary goal of rate hikes is to cause enough job losses to ensure that wage growth slows down. And if that isn’t happening despite several rate increases, it adds pressure on the central bank to raise rates further, and keep them high for longer.
Admittedly, monetary policy does work with a long and variable lag. That is why central bank decisions are usually based on forecasts; today’s data is not supposed to be the dominant driver of today’s policy. But these are not normal times. The inflation spike of the last 12-15 months has been massive, persistent, and made a mockery of forecasts. And one by one, central banks have had to adjust policy to incoming inflation data. The Fed broke its own forward guidance and hiked 75bp in June because of a strong May CPI report. And the ECB followed in July, hiking 50bp despite promising 25bp.
Strong jobs reports are usually greeted with enthusiasm in the Marriner S Eccles building. But the starting point on inflation, including core inflation, is simply too high. Markets have gotten ahead of themselves in expecting the Fed to start taking a more dovish approach. As things currently stand, any Fed surprises over the next few months are more likely to be hawkish. Investors waiting for an imminent pivot will have to keep waiting.
For the first time in history there are more people over 65 than under 5. Pensioners outnumber children in a growing number of countries, including the UK, much of Europe and Japan. By 2030 there will be over 1bn people over 65 and more than 200mn over 80, with the number of elderly doubling over 20 years.
Improvements in public health and medicine account for increased longevity, a long-term trend of about two years per postwar decade (notwithstanding the recent reversals which are primarily due to the pandemic and inequalities in healthcare). More surprising is how quickly fertility is falling. More than half the countries in the world are now below the level of fertility required to keep the population the same from generation to generation.
In a single generation, societies as different as Iran and Ireland have seen their birth rates plummet in a way that cannot be explained by cultural and religious beliefs. Nor do income levels explain the difference. The United States and countries as diverse as Italy, South Korea, Japan, Hungary, Poland, Russia, China and Brazil are all recording record lows in fertility, and even India is now below replacement level. In fact, over half of projected population growth in the coming 30 years will be in just eight countries.
The collapse in fertility coupled with increased longevity leads to a rapid ageing of societies. The working age population of the 38 member countries of the OECD is projected to decline by around a quarter over the coming 30 years without higher levels of migration.
As a rapidly growing elderly population rely on the taxes, pension contributions and services provided by fewer and fewer workers, economies will come under increasing strain. With average life expectancy after retirement approaching 20 years in the developed world and real adjusted returns barely positive, much higher levels of savings are required to fund pensions. More saving means less consumption, dampening demand for everything other than services for the elderly.
A key challenge is to direct a growing share of the savings into long-term investment, as the collapse in corporate and public investment means that as societies have aged, so too have their stock of infrastructure, health, education and other systems, with this contributing to the slowdown in productivity.
The declining size of the workforce will mean that the revenue of governments through payroll taxes will shrink. The growing share of a declining workforce that need to be devoted to elderly care acts as a further drag on productivity and growth, since care work is necessarily not open to many gains in efficiency.
The widening gap between the improvements in life expectancy and the much slower progress in addressing dementia and other degenerative brain diseases is compounding the pressures on families, care systems and private and public finances.
Ageing also exacerbates income and wealth inequalities. With these disparities being widened by the pandemic, the gap in life expectancy exceeds 10 years between the poorest and richest communities in the US and UK. And there is a staggering 32-year gap in average life expectancy between rich countries like Japan and some of the poorest countries, such as Sierra Leone.
Across Africa, the median age is below 20, half that of Europe and much of East Asia. Asia’s growth benefited from labour-intensive manufacturing, back-office processing and call centres. The automation of these processes is removing the middle rungs of the development ladder, with potentially dire consequences for the 100mn young Africans who will be entering the labour market over the next 10 years.
Demography is not destiny, but it does need to inform public policy and individual decisions. It means greater attention must be paid to improving health, extending working lives, accepting more migrants, increasing productivity and growing savings. The shift from consumption to savings can increase the potential for a circular economy and reducing carbon emissions. It also reduces interest rates and inflation, allowing for higher levels of investment in clean infrastructure, health, housing and education, which are the bedrock of sustained growth.
If we stop kicking the demographic time bomb down the road, it will be possible to achieve stable and sustainable societies that provide a better life for future generations as well as our own.
Kia ora again from the South Pacific where this Trade Secrets writer is having a brief and chilly hiatus from the height of summer elsewhere. Today’s main piece looks at some rare pieces of good news: moves by the Quad partners and the WTO to tackle the ecological and human rights disaster created by the global fishing industry. We give a reality check on the scale of the problems and offer some new solutions. Charted waters is looking at the movement of people and the international competition for talent.
Email me at firstname.lastname@example.org. Trade Secrets will be back in two weeks, with my colleague Andy Bounds taking the chair for a guest appearance.
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Over recent years the Financial Times has documented horrific claims of environmental pillage and modern-day slavery across the global fishing fleet.
We’ve written about Taiwanese vessels where Indonesian crews worked 22 hours only to return to sleeping and eating quarters rife with insect infestations. We’ve also exposed the Korean ships that hunted down walruses, seals and dolphins for their livers and genitals. And we’ve reported on China’s distant water fleet — by far the world’s biggest — which stands accused of rapacious illegal overfishing, decimation of endangered species and abuse of south-east Asian fishing crews.
Despite the stark risk overfishing poses to the livelihoods of millions of people, a constant complaint from NGOs has been that governments are doing far too little in response. Policing an industry which operates on the high seas — out of sight out of mind — has not been a high priority for many developed nation capitals. Yet in recent months two key wins have been notched in favour of the oceans and marginalised workers.
The Quad security grouping of the US, Japan, Australia and India in May launched a new satellite-based initiative across the Asia-Pacific region, a plan mostly targeted at illegal Chinese fishing. The Indo-Pacific Partnership for Maritime Domain Awareness will see the Quad partners fund a commercial satellite-based tracking service that will pass on maritime intelligence to countries in near real-time. US officials told the FT’s US-China correspondent Demetri Sevastopulo that the new system would monitor radio frequencies and radar signals that would allow countries in the region to pick up vessels that have turned off automatic identification systems (AIS) transponders to avoid detection — a key problem in illegal fishing.
Then in June, the WTO’s 12th ministerial conference finally — after 20 years of negotiations — reached an agreement to end harmful fisheries subsidies. As Alice Tipping of the International Institute for Sustainable Development neatly surmised: while the exceptions for developing countries are still to be worked out, the rules will at the least force governments to consider the legality and sustainability of the fishing activity they subsidise, something that very few do at present.
In a world that has over the past three years lurched from a pandemic to war in Europe, and where big economies teeter on the edge of economic recession, it seems important to note these positive steps when they do occur. That being said, neither the WTO’s breaking of a decades-long bureaucratic impasse nor the Quad partners promising to police the Pacific portend to be a panacea. The scale of the problem, Trade Secrets believes, requires far bolder action.
For the uninitiated: the UN estimates that up to 26mn tonnes of fish are caught illegally each year (with a value of about $23bn). Globally, around 20 per cent of all fish caught come from illegal, unreported and unregulated fishing activities. And half of global fish stocks are fished at biologically unsustainable levels (a change from 10 per cent in the 1970s).
Yet the fishing industry still enjoys massive subsidies. And it’s not just China. Researchers in academic journal Marine Policy found that China, the EU, the US, Korea and Japan — the top five — account for close to 60 per cent of total global subsidies, at a massive $20bn. They also noted that over the previous decade “the bulk harmful ‘capacity-enhancing’ subsidies, particularly those for fossil fuels have actually increased as a proportion of total subsidies”.
What’s more, subsidies classified as harmful still stand at about $22bn, annually.
Earlier this year, one of the most extensive investigations into China’s distant water fleet found that 95 per cent of the crew on board reported witnessing illegal fishing. The problems are among their most acute in West Africa, where Chinese trawlers catch an estimated 2.35mn tonnes of fish annually.
From a common sense point of view, the Quad’s focus on the Pacific will miss huge swaths of the most problematic areas, especially off the coast of western Africa, but also South America. The focus only on China is also problematic given vessels from the Quad-friendly countries of Taiwan and South Korea have for years faced accusations of widespread environmental plunder and shocking treatment of south-east Asian crews.
And while the US has also promised to increasingly utilise its coastguard to help police Chinese fishing — a move started by the Trump administration and continued under President Joe Biden — sending a few cutters into the vast Pacific, an area of 165mn square kilometres, is not expected to significantly move the dial.
Similarly, when it comes to the WTO breakthrough on subsidies, in a speech in late July WTO director-general Ngozi Okonjo-Iweala herself said: “Reaching the agreement was a vitally important step — but implementing it is what will matter.”
Implementation is one issue. Enforcement is another. To make serious improvements via the WTO its members will probably have to bring complaints against China, a move that will undoubtedly risk backlash from Beijing.
So, what is really needed? Trade Secrets posed this question to Steve Trent, the founder of the Environmental Justice Foundation who has decades of experience advocating for sweeping changes in the fisheries industry.
Trent believes a focus on China in the short-term remains “valuable” and he supports the Quad’s initiative given that abuses are “systemic across the Chinese fleet, without independent and consistent monitoring, the likelihood is these abuses will continue, at least in the near term”.
But longer term, Trent is clear: “Ultimately, you need transparency across the architecture of global fisheries governance. It is quite simple. Every vessel, we should be able to see who is fishing what, where, when and how”.
One of the key first steps, he believes, is for the major market states of Japan, the US and the EU to align their regulation and requirements for market access and exclude from their markets those products where they cannot prove the provenance, when they do not have the transparency that allows surety that it “has not been produced by a slave, caught by a slave, or caught legally or unsustainably”.
Alan Beattie writes a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all Alan’s columns and previous newsletters too.
For today’s Charted waters, I want to focus on the international market for human capital rather than goods and services. My colleague John Burn-Murdoch has (once again) produced some excellent data analysis on the subject.
What we can see from the above chart is that the UK has become a younger country, now the fourth-youngest in Europe, but only because of migration.
Now for the bad news. The UK’s luck in attracting young foreign workers is on the turn. As the above chart shows, it is not just Brexit. The global competition for talented labour has been increasing for the past decade. The question is what the UK is going to do about this. The concern is that it is going to do nothing. (Jonathan Moules)
Argentina’s new economy minister has pledged to bring fiscal order to the country and regain market confidence by establishing a “super ministry” to tackle double-digit inflation.
The British pound and government bond yields slipped last week after the Bank of England raised interest rates by the most in 27 years to battle surging inflation and warned of a protracted recession.
Opec and its allies agreed one of the smallest oil production increases in the group’s history as Saudi Arabia attempted to appease western allies without using up all its unused capacity.
Favouring political allies when constructing supply chains is expensive, tricky and possibly self-defeating, according to Alan Beattie.
Trade Secrets is edited by Jonathan Moules
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