Labour's comeback budget: What it means for the travel industry
Labour’s return to the budget stage after 14 years was marked by Chancellor Rachel Reeves unveiling £40 billion in tax hikes.
As the travel industry now looks to navigate the potential shifts in consumer confidence and spending power, we’ve taken a unique approach: examining how past budgets have historically influenced demand and sentiment. By understanding these patterns, we can better anticipate the potential ripple effects of this Autumn budget on both business and consumer travel in the months ahead.
Lessons from the past: How previous budgets have shaped travel demand
2015 Conservative budget: Confidence high, but limited impact on travel demand
In July 2015, the Conservative government presented its first budget since the coalition, set against a backdrop of relatively strong consumer confidence. Leading up to the budget, confidence levels hovered around +4, buoyed by low inflation and rising wages. While holiday booking intentions showed a slight dip immediately after the budget announcement, they quickly returned to stable levels. This suggests that while a change in government may have caused short-term uncertainty, it did not significantly affect holiday plans. Strong consumer sentiment and healthy discretionary spending ultimately supported continued holiday bookings, even amid the political transition.
Spring 2022: Pent-up travel demand competing with record-low confidence
The environment surrounding the 2022 Spring Statement was starkly different. Consumer confidence was plummeting, largely due to rising energy costs, surging interest rates, and uncertainty stemming from Russia’s invasion of Ukraine. By February 2022, confidence had hit a 30-year low of -26 and continued to fall through March and April. However, despite these challenges, pent-up demand for travel - following the easing of COVID-19 restrictions - drove a notable year-on-year surge in holiday bookings, and demand remained resilient, even as consumer confidence continued to drop.
Autumn 2023: Travel demand defies economic pressures
Before the Autumn 2023 budget, consumer confidence took a significant hit, dropping 9 points to -30 in October. Concerns over the cost-of-living crisis, persistent inflation, and ongoing geopolitical tensions weighed heavily on households. Yet, despite this pessimistic outlook, travel bookings remained stable and even showed year-on-year growth as consumers continued to prioritise discretionary spending on holidays, even in challenging economic conditions.
Following the budget announcement, confidence showed signs of recovery. Key measures, such as National Insurance cuts and easing inflation, contributed to this uplift, indicating that strategic budgetary choices can positively influence consumer sentiment, especially in sectors like travel that are sensitive to shifts in disposable income and economic optimism.
July 2024 pre-budget: How cuts to Winter fuel allowances might shift priorities
In July, Britain’s Finance Minister announced plans to limit Winter fuel payments to pensioners receiving pension credit or other means-tested benefits, significantly reducing the number of pensioners eligible for this support. On August 23rd, Ofgem announced an increase in the energy price cap, which took effect on October 1st, adding further strain to household budgets as the colder months set in.
For many pensioners, these changes will reduce disposable income as they prioritise essential expenses like heating and groceries. According to Mintel’s confidence tracker for September 2024, the top financial concerns for Boomers in recent months have been rising food and drink prices at supermarkets (61%) and increased gas and electricity prices (48%). With the additional pressure from reduced Winter fuel allowances, pensioners may allocate a greater portion of their budget toward these essentials.
While the full impact yet to unfold, brands need to be mindful of these financial pressures to retain their appeal with the over-55 market. Adapting offerings, messaging, or pricing strategies to address these realities could be vital for brands aiming to support and remain relevant amid a challenging economic landscape.
What does Labour's Autumn 2024 budget mean for travel brands?
As the new government prepared to deliver its first budget on October 30th, consumer confidence was notably fragile, dropping from -13 in August to -21 in October. Concerns over potential tax hikes and welfare cuts were widespread, with the uncertainty surrounding the budget cited as a primary reason for “freezing” marketing budgets across industries in Q3.
For travel brands, the budget provided both clarity and mixed prospects. While the travel sector has often shown resilience in economic uncertainty, specific measures could weigh heavily on businesses. For example, the 1.2% increase in employers’ National Insurance contributions (to 15%) from April 2025 - starting at a lower income threshold of £5,000, down from £9,100 - is expected to impact many SMEs, potentially stalling the growth the government claims to prioritise.
From a consumer perspective, the outlook appears more favourable. In addition to an increase in the National Minimum Wage, Fuel Duty remains frozen, and there are no increases in National Insurance, VAT, or Income Tax. Although a hike in Air Passenger Duty was anticipated as a potential travel deterrent, the increase is minimal - only £2 for short-haul routes - and is unlikely to affect demand significantly. YouGov data shows a cautiously optimistic public response, with many viewing the budget as a move to maintain economic stability.
Adapting to change: Navigating shifts in consumer behaviour post-budget
Overall, there appears to be an appreciation for the sense of stability the budget provided, with clear guidance on taxation that aids long-term planning.
However, travel brands may see shifts in demand as customers weigh the impact of tax changes on their discretionary income and scale back on non-essential spending, possibly affecting holiday budgets. Business travel, too, could see adjustments as companies reassess budgets in light of tax increases.
Ultimately, while the true effect of these measures will unfold over time, by understanding the patterns from past budgets, travel brands can better prepare for the evolving landscape and identify strategies to maintain consumer engagement and drive demand in a changing market.
Anna Henderson
Our Strategy and Research Executive, Anna, combines fresh perspectives with a strong analytical foundation to develop innovative marketing strategies for our clients.
