THE WALES TOURISM ALLIANCE has submitted its formal response to the Welsh Government’s Visitor Levy Bill. The response, delivered to the Finance and the Legislation, Justice, and Constitution Committees, outlines several key concerns about the proposed legislation.

Key issues raised by the WTA

1. The Welsh Government’s own Explanatory Memorandum and Economic Impact Assessment suggest the policy’s administrative costs will outweigh the revenue generated.
2. The Bill extends beyond tourism visits, encompassing stays of less than 31 days for purposes such as work or education.
3. Local authorities will retain sole control over any net revenue, with no obligation to allocate funds to tourism-related initiatives.
4. The data underpinning the policy and its assumptions are unreliable and raise significant concerns.
5. Industry input, including that from Wales’s own tourism forum chairs, has been inadequately considered.
6. The policy fails to account for the pressures already impacting Welsh tourism over the past five years.

Industry reaction

WTA Chair Rowland Rees-Evans voiced disappointment over the proposal, which the Welsh Government’s own Economic Impact Assessment predicts could lead to net job losses.

“The WTA has engaged with the Welsh Government since the Visitor Levy was proposed, and we are disappointed they are pursuing a policy their own analysis suggests will have a negative impact on employment,” Rees-Evans stated.

“The tourism industry in Wales is still recovering from the devastating effects of Covid-19, grappling with the 182-day rule on holiday lets, and facing ongoing challenges from the cost-of-living crisis. Additionally, businesses are contending with a 40% rise in the living wage since 2020 and increased national insurance contributions starting this April.

“To impose another burden on a fragile sector, which employs over 20% of the workforce in some parts of Wales, is not in the best interest of the country.”

Rees-Evans emphasized the broader implications of the levy, stating:
“We must also dispel the notion that this is solely a Tourist Tax. It is a Visitor Levy that will affect everyone in Wales – from children on overnight school trips to patients requiring overnight stays before early NHS admissions.”

Pictured: Rowland Rees-Evans, Chair of the Wales Tourism Alliance

EMPLOYMENT measures announced in the Autumn Budget may have affected attitudes to recruitment by businesses in Wales in Q4 of 2024, according to Chambers Wales South East, South West and Mid’s latest Quarterly Economic Survey.

17% of businesses in Wales increased the size of their workforce over the last three months and 17% also expected their workforce to increase in the next quarter. While over half of the businesses surveyed (59%) expect the size of their workforce to remain constant in the next three months, there was a rise in the number of respondents who foresee that their workforce will decrease, from 15% in Q3 to 24% in Q4.

Fewer businesses in Wales attempted to recruit during the final quarter of the year than in Q3. Of those who did recruit in Q4, 65% experienced difficulties especially when recruiting for professional, managerial, skilled manual and technical roles.

The latest edition of the Quarterly Economic Survey also included questions specific to measures announced in the Budget such as the proposed increase to the National Minimum Wage and National Living Wage from April and whether the changes would impact businesses’ staffing plans, particularly in relation to hiring young people such as graduates, school and college leavers.

Around half of the respondents revealed that the increases to £10 and £12.21 an hour for the minimum wage and living wage respectively would not affect their business. Other businesses in Wales suggested that they would have to either halt recruitment plans, approach recruitment with caution or increase the prices of their services.

Businesses also expressed their hesitation to hire young people, with many reducing the numbers they plan to recruit in 2025.

Gus Williams, interim CEO at Chambers Wales South East, South West and Mid, said: “Taxation has become the external factor causing the most concern for businesses in Wales and the measures announced in the Budget such as the increase to employers’ national insurance contributions, combined with rising labour costs and changes to employee rights, have not surprisingly driven those concerns.

“Our Quarterly Economic Surveys show that recruitment remains a persistent challenge for businesses in Wales, and this continued in Q4 with a rise in the number of firms expecting their workforce to decrease and fewer investing in training. One of the impacts of the tax and National Minimum Wage increases looks to be a reduction in expected entry level recruitment this year.

“As businesses review their budget planning in preparation for upcoming changes, more support is needed to tackle barriers to growth such as access to skills development and learning pathways to help companies attract and retain talent with the right skills for their sectors.”

WEAKER declines in output and new orders Firms remain optimistic for 2025 Employment falls at fastest rate since September 2020

The latest Cymru Growth Tracker from NatWest highlights a slower pace of decline in business activity and new orders for Welsh companies in December 2024.

The Wales Business Activity Index, which measures month-on-month changes in output across the manufacturing and service sectors, rose to 48.9 in December from 47.7 in November. While still below the 50.0 threshold that indicates growth, the latest reading signaled the slowest contraction in the current four-month downturn.

The softer decline in output was underpinned by only a slight fall in new orders. Welsh firms expressed optimism for increased activity in the year ahead, although concerns over economic uncertainty, rising costs, and selling prices tempered expectations.

Employment and Cost Pressures

Despite improved business activity, subdued demand, spare capacity, and heightened cost pressures led to the sharpest drop in employment since September 2020. Redundancies were driven by cost-cutting initiatives and lower sales, with voluntary leavers not being replaced.

Although firms managed to increase selling prices at the fastest rate since May 2024, business confidence slipped to a 13-month low.

Jessica Shipman, Chair of the NatWest Cymru Regional Board, commented:

“Welsh businesses saw a slightly brighter end to 2024 as contractions in output and new orders eased. Success in engaging new customers helped slow the decline in new business, and firms are cautiously optimistic about 2025. However, the pace of job cuts accelerated, and rising costs—particularly wages—pose ongoing challenges to margins.”

Comparing Wales to the UK

The performance of Welsh businesses contrasted with modest growth across the UK. While Wales recorded slower declines, the pace of contraction in business activity remained more pronounced than the UK average.

New orders also fell for a second consecutive month in December, though the decline was among the weakest of the ten UK regions experiencing downturns. Optimism among Welsh firms about future output fell to its lowest level since November 2023, lagging behind both the UK average and historical trends.

Inflation and Pricing Trends

Input costs at Welsh firms rose at their fastest pace since April 2024, driven by higher supplier prices, rents, and wage bills. The rate of cost inflation was slightly below the UK average, but the pressure remained historically high.

In response, businesses raised selling prices at the quickest rate since May 2024. Despite this, Wales saw one of the slower increases in charges among the 12 UK regions, with only Yorkshire & Humber, Northern Ireland, and the West Midlands recording weaker upticks.

Employment and Backlogs

Welsh private sector firms reported the steepest job cuts of all UK regions, with staffing levels falling at the fastest rate since September 2020. Similarly, incomplete work declined at the quickest pace among the monitored UK areas, reflecting subdued demand and increased spare capacity.