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Tourism and the economy in Scotland

By Graeme Roy - Posted on 15 March 2018

Professor Graeme Roy will be a speaker at the Scottish Tourism Alliance (STA) Conference this year where he will be set out the background scene for the day. Here, he gives an overview of the Scottish tourist economy and the economy.

Tourism is an important part of the Scottish economy. Spending by tourists in Scotland generates around £12 billion of economic activity for the wider Scottish supply chain. The sector is estimated to contribute around 5% of total Scottish GDP and supports over 215,000 jobs in the economy. The sector has a disproportionately important role in a number of Scotland’s rural communities where employment opportunities are less easy to come by.

Like all sectors in the economy, a key short-term challenge is the heightened economic uncertainty that currently exists and the impact that this might have on discretionary spending in the economy. The sector has already been hit by reduced activity in the overnight business market, in part reflecting the recent downturn in the oil and gas industry and wider slowdown in the Scottish economy we have seen over the last couple of years.

In respect of Brexit, a key risk is the possible reduction in free movement. The tourism industry in Scotland has benefited from an inflow of migrant workers. If this was to be reduced, then it would pose a major challenge to the sector.

Our analysis shows that a deal that ensures that Scotland and the UK retain close economic ties with the EU is likely to be the best deal in terms of jobs and growth in the long-run. The EU accounts for over 40% of Scotland’s international exports and EU migrants make a significant contribution to Scotland’s economy – particularly in sectors like tourism where 17,000 EU nationals are employed in Scotland.

But, like it nor not, Brexit is happening, and it is vital that businesses and government prepare for different outcomes in the negotiations. Those firms ready to respond flexibly and positively to whatever the outcome will be better placed to succeed. This will require a focus not just on responding to the challenges that Brexit will create but also seeking out new opportunities.

And there are numerous opportunities for the Scottish tourist industry in the years ahead.

Firstly, Scotland undoubtedly has a world-class tourism sector and an international reputation as a positive destination for visitors. In a climate of increased uncertainly, it is vital that the sector focuses upon its core strengths and investing in the activities that will drive its success no matter the wider economic or political context.

Secondly, there are significant opportunities in emerging markets. Whilst traditional markets like the rest of the UK, Europe and North America will continue to be the most important markets for Scotland, faster growth in other parts of the world – and the rise of the consumer and tourists – provides new opportunities to attract additional visitors.

Thirdly, one likely consequence of Brexit is that the pound is likely to stay low for the foreseeable future. This makes Scotland an attractive location for international tourism.

Overall growth in the Scottish economy is expected to be relatively weak over the next few years as Brexit uncertainty acts as a break on investment and spending.

We also know that the Scottish economy is likely to go through major long-term structural changes over the next few years. For example, the oil and gas industry – whilst still continuing to provide jobs and investment for years to come – will be on a much smaller scale than in the past.

This blog is taken from a question and answer interview first used in the Scottish Tourism Alliance’s online magazine The Talker. The STA conference will take place on April 24.

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