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The travel industry is desperate for government assistance but would the autumn budget help or hinder it?
The UK government’s autumn budget was one of the most anticipated economic set pieces in years. Not only did it represent the Labour party’s first set of economic plans after 14 years in opposition, it also represented a sea change in how the British government treated its travel industry.
Even before the budget, travel and tour operators were grappling with structural changes that seemed likely to change the way it operated. Brexit (and all the new legislation that accompanied it) caused a fundamental rethink in how travel businesses access new markets and enticed existing ones to continue their business. Meanwhile, changing consumer habits ensure travel is an increasingly important expenditure for many people, while growing markets are giving a different customer base access to international tourism.
These challenges combine to pose significant risks to the long-term health of the travel industry. Coupled with new policies laid out in the autumn budget, many are asking where they go from here and why support from the government seems so unlikely.
Rising employment costs
One of the most significant challenges for travel businesses is the planned increase in employer National Insurance Contributions (NICs) by 2% and the 6.7% rise in the National Living Wage from April 2025. While these measures aim to support workers during a cost-of-living crisis, they represent a sharp rise in fixed costs for businesses.
Alistair Rowland, CEO of Blue Bay Travel, highlighted that these changes would likely hit small and medium-sized enterprises (SMEs) the hardest. Many travel operators, already grappling with post-pandemic recovery and rising inflation, may face difficult decisions regarding staffing levels and pay structures to balance their budgets. This could reduce customer service quality and affect the broader customer experience.
Aviation feels the strain
The increase in Air Passenger Duty (APD) has also caused frustration among travel and tour operators. Ryanair’s CEO Michael O’Leary described the measure as a “short-sighted tax grab” that could harm tourism and disproportionately affect families traveling on budget carriers. Airlines like Ryanair and easyJet have already indicated plans to reduce their UK flight capacity, which could limit connectivity for travellers and raise prices for domestic and international travel.
A reduction in flight availability could harm inbound tourism while making outbound travel less accessible to UK residents, particularly those on tighter budgets.
Tax tweaks cause pressure
The reduction in business rates relief from 75% to 40% is another blow to the travel sector. Although the relief is capped at £110,000, it will disproportionately affect businesses operating multiple locations, such as hotel chains and tour operators with storefronts. For smaller operators, the reduced relief may force difficult choices between scaling back services, raising prices or reallocating budgets away from growth.
Nick Summers, Managing Director of the Nationwide Caterers Association, expressed disappointment, arguing that the government missed an opportunity to offer much-needed support for small businesses. Instead, many feel that the budget’s measures may stifle growth and innovation.
The importance of treasury management
In many ways, the autumn budget threw the need for sound treasury management into stark relief. Despite the opposition to these measures, travel operators can do little but grit their teeth and get on with the job.
Fortunately, there are ways that businesses can protect their profit margins while adjusting (or even exceeding) their strategic objectives. Through a comprehensive, rounded approach to currency risk and overseas exposures, importers can ensure their profits remain safe even amid the mayhem of volatile markets.
Contact Smart Currency Fintech to see how our bespoke product suite can help your business scale at pace as well as protect your finances from these broad risks.
