New Oxford Economics research reveals the economic growth potential of greater business traveleInternational business travel returning to pre-financial crisis levels within the next five years will add as much as £6.5 billion to the value of UK trade according to powerful new research that establishes a clear link between business travel and economic prosperity.
To put this in context, £6.5 billion equates to around one per cent of the UK’s total trade in 2015. As trade volumes contribute to economic growth, this means that the average international business travel air trip triggers a £34,000 contribution to gross domestic product (GDP).
The ‘Value of International Business Travel’ report, developed by Oxford Economics, is a comprehensive assessment of the direct correlation between business travel and imports, exports, foreign direct investment (FDI) and productivity.
Commissioned by the GTMC – the industry body for the travel management sector – the research also highlights that international business travel attracts inward FDI. In fact, an increase in business travel of one per cent grows FDI by 0.3 per cent, the equivalent of providing a £100 million boost to investment. A return to pre-crisis levels of business travel could grow inward FDI by £1.6 billion – an amount that equates to five per cent of the total FDI in 2012.
With costs for a new runway at either Gatwick or Heathrow Airport to accommodate greater UK air capacity estimated to be between £9.3 billion and £18.6 billion, the report gives an indication of the return on investment available from just the business travel sector in the very short term.
Paul Wait, CEO, the GTMC, comments: “This new research from Oxford Economics highlights clearly that international business air travel is critical for a vibrant economy, and a strategic consideration for companies looking to grow. Furthermore, the business travel sector is a major contributor to UK trade, powering foreign direct investment, exports and imports. The magnitude of the impact of business travel on economic performance and foreign investment within the UK is staggering – the value of business travel cannot be underestimated. The GTMC’s report shows that factors heavily influencing business travel growth, such as airport expansion, need to be urgently addressed with these numbers in mind.”
In addition to the economic impact of international business air travel, the new report also addresses air connectivity and its importance. Key findings of the ‘Value of International Business Travel’ report include:
· Business air travel boosts trade – a one per cent increase in total business travel volumes will boost total trade by around £400 million, or 0.05 per cent
· Business air travel plays a greater role in driving exports than imports – a one per cent increase in business travel increases exports by 0.05 per cent, and imports by 0.03 per cent, around £160 million and £125 million respectively
· Greater air connectivity also generates trade – a one per cent increase in air connectivity increases trade by 0.09 per cent, or around £600 million
· Importantly, there is strong evidence that greater trade and FDI provide a boost to productivity. The extra trade and FDI generated from a one per cent increase in international air business travel would boost productivity and increase UK GDP by £390 million
Dr Nishaal Gooroochurn, head of econometrics, Oxford Economics, explains: “Oxford Economics’ new report outlines that business travel has not yet recovered its pre-2008 levels, and defines the remarkable impact on the UK’s economy that such a rebound would bring. If international business air travel volumes continue on the upward trajectory that they have enjoyed since 2010, then the return to the wider UK economy would be significant. Our findings demonstrate the huge worth of business travel as an industry sector to the UK.”
According to the new Oxford Economics report, international business air travel has begun to increase, rising by 12 per cent between 2010 and 2014. This followed an extensive decline of 26 per cent between 2006 and 2010 around the financial crisis of 2008. International business air travel volumes have not yet regained to their pre-crisis levels.
Business travel intensity is highest amongst the professional services sector, with financial services generating the greatest levels of intensity. Interestingly, business travel is focused in Western Europe and the USA, with France, Germany and the US alone accounting for a third of all international air business travel. The economic fortunes of these key markets therefore have a substantial impact on the ability of business travel to continue its rebound.
Wait adds: “The impact of the financial crisis in 2008 demonstrates that during periods of low confidence in the economy, business travel slows. This new research demonstrates that investment in business travel is in fact an important route to growth and trade recovery.”
The findings were released at the GTMC’s annual conference in Marco Island, Florida attended by travel and transport industry professionals, including Travel Management Companies (TMCs) who book and manage business travel on behalf of UK companies.
Oxford Economics’ research has taken a macroeconomic approach to establishing how international business air travel boosts economic growth through trade, measured as a sum of exports and imports, and through foreign direct investment.
Representing a diverse range of travel management companies – from global organisations to small independent specialists and top regional agencies – the GTMC is the voice of the business travel and acts to lobby those who have an impact on the business travel community, together with promoting the activities of its members as the best in quality and value to the business traveller.