Europe’s recession looks to be over, with an increasing number of indicators pointing in a positive direction.
Now, outbound business travel is on the up, too. The Global Business Travel Association, which monitors business spending in a series of half yearly reports supported by Visa, has just issued its latest survey of western Europe markets, and sees a considerably brighter outlook ahead, even when compared with its predictions of six months ago.
The report groups together five markets: the UK, Germany, France, Spain and Italy, which represent the majority of European spend.
The prediction is that travel spending across these five will rise 5.1% this year, to EUR137bn, and that growth will accelerate to 6.5% in 2015. The expectation is considerably stronger than that contained in the GBTA’s autumn report on the same countries, which suggested 3.3% growth for 2014.
Commented Catherine McGavock, European regional director for GBTA: “Continued signs of strength and progress in the European economy and gathering momentum suggest that 2014 will be a transition year. At long last the recession appears to be over and the European economy on a more solid footing. While challenges remain, this is very positive news and bodes well for business travel growth as business confidence rises across the region.”
There is still a north-south split evident, with Germany and the UK expected to lead growth, but for the first time in five years, all five of the countries will experience an improvement in spend. Germany will lead the charge, with a 5% growth this year and expectations of a 10.6% increase in 2015. Domestic spend will grow 7.2% this year, and 12.2% in 2015, reckons the GBTA.
In France, growth of 5.4% this year is expected to better the UK’s improvement of 4.4%. As French businesses wake up to international opportunities, outbound spend will expand 8.8%, before moderating to 2.6% growth in 2015. Similarly to France, Spain is likely to see a 4% rise in overall market activity, but a 10% increase in outbound spend. Of the five markets, Italy will be the slowest to recover, seeing a 2.6% improvement in 2014 and the same in 2015.
The main risks that could derail the predictions are external ones, suggests the report. Sovereign debt problems, an oil supply or price shock and emerging market currency moves are all well-established issues, but one new potentially worrying issue is the prospect of deflation in quiet European economies. Were this to become established, then consumer behaviour tends towards postponing purchases, damaging consumption.
“According to the report, stronger economic conditions are forecast to lead to an across-the-board increase in business travel throughout Western Europe,” said Tad Fordyce of Visa. “As 2014 progresses there are still economic hurdles to clear, but the overall forecast is trending in a positive direction.”
The modest European figures compare with 12.6% growth in spending expected for 2014 in Brazil, and 17.2% in China. Tourism markets, meantime, are expected to see 4-5% growth in Europe this year, predict the UNWTO in their most recent World Tourism Barometer.
HA Perspective [by Katherine Doggrell]: The recovery of Europe has been much hailed and, apparently coming out of the other side, the Eurozone also appears to be intact, with no exits. While the likes of Greece and Italy are still with us, as can been seen, it’s a two-tier system.
Unemployment for Portuguese under-25s was 34.4% last year, making it unlikely that they are part of the emerging bubbles of confidence. The question remains whether this generation has been sacrificed to protect the Euro, when an exit and subsequent currency devaluation may have been better for individual states.
Across the 28-strong European Union, GDP will expand by 1.5% this year and by 2.0% in 2015, according to new forecasts from the European Commission in February. Across the 18-strong Euro zone GDP will rise by slightly less: 1.2% in 2014 and by 1.8% in 2015.
The eurozone recovery will not be strong enough to make any real dent on unemployment this year, forecast to fall from 12.1% last year to 12.0% in 2014. This will keep inflation low though, falling from 1.4% in 2013 to 1.0% this year, rising to a forecast 1.3% in 2015.
There remains some caution that the current confidence is merely a bubble. The recovery came after the ECB dropping its lending rate to 0.25% in November, giving it no more room under the limbo bar should deflation set in, as is the fear. All hopes now rest on the recovery being convincing.
But you can’t keep a good road warrior down and after years of restricted travel, any sign of hope is enough to have them heading to the nearest airport even if, for now, they remain within Europe. For Europe’s economies, that’s no bad thing.