London's economy hit as tourism tapers off

Rising inflation and faltering consumer confidence are hurting London's tourism industry, according to the capital's tourism authority, with prospects poor for the rest of this year and next.

More than 25 million people visited London last year, making travel and tourism an enormous contributor to the economy. It generates £16.6 billion of business and employs more than 250,000 people, according to the website Visit London.

But a weakening dollar, rising inflation and a general downturn in major world economies have taken a toll in recent months, and the impact is likely to last well into next year.

"Economic conditions have deteriorated badly since May, with business and consumer confidence weakening significantly," Visit London said in its latest quarterly report.

"We now expect overall visits to fall by 2.7 per cent this year and by 1.2 per cent in 2009. Visit spending is anticipated to grow by less than inflation in both years," it said.

"Although strong visitor growth since 2005 does mean London is facing this slowdown from a position of relative strength, there are significant risks that this slowdown could be more severe than predicted."

The decline is visible in both domestic and international visitor numbers. Internationally, the downturn is most marked from the US, with a weak dollar constraining Americans' ability to travel and spend freely.

While the euro has strengthened against both the dollar and the pound, the increase has not been enough to entice substantially more European visitors and offset the decline in numbers from across the Atlantic.

"Although some sectors of the visitor economy, such as retail and theatre, continue to report robust trade, others such as hotels, business venues and attractions are witnessing weakening trade.

"Soft future booking levels have also been widely reported," the report said.

Overseas visitors to London spent more than €10.2 billion last year, providing a huge injection of cash to the capital. Sights such as the London Eye, Big Ben, the British Museum and Madame Tussauds have made London a global tourism leader.

Visit London expects total visitor numbers to decline to 24.8 million this year and 24.5 million next year. The figures register those who stay overnight, not day-trippers.

Japanese and American visitors are both expected to fall this year, while numbers should rise by four to five per cent this year for Russian, Indian and Middle Eastern tourists.