Tourism, in terms of its contribution to the overall economy, will be the sector hit hardest by the ...
Tourism, in terms of its contribution to the overall economy, will be the sector hit hardest by the foot and mouth crisis, according to Suzie Kemp, fund manager of the Credit Suisse Fellowship Fund.
The Centre for Economic and Business Research is predicting there will be, as from 27 March, a £9bn cost to the economy as a result of foot and mouth, of which £5bn comes from tourism. Kemp says the original overall prediction was a £3bn economic cost. Kemp says not only are rural operators, pubs, hotels and caterers affected by the crisis but also London. She says: "The US media is playing an important part in keeping American tourists away from London. It seems there is a lot of confusion between foot and mouth and BSE. This may have an impact on London hotels and department stores."
Scott Meech, a fund manager at Threadneedle, says foot and mouth will cause a very modest short-term impact on the economy, but nothing major.
He says: "The stock market has got other things to worry about at the moment. A few stocks may be hit as a result of the crisis, but overall the effect will be minimal."
Meech says the crisis will have a short-term effect on the leisure industry, as a result of the drop in overseas visitors, especially the Americans. This, he says, could affect the big hotel companies like the Hilton Group and De Vere.
The FTSE Leisure, Entertainment and Hotels index, which makes up 2.35% of the All-Share Index, over 12 months to the end of March 2001 was down 19.15% compared with a fall in the All-Share Index of 10.195 over the same time period. The Hilton Group makes up 8.2% of the leisure index and over the same time period fell 27.11% and heading into the first week of April was still on a downward path.
Meech says that in the food manufacturing sector some companies are gaining because of the current demand for meat alternatives. Kemp says: "Food manufacturers have more diversified product portfolios and therefore should be protected to a greater extent from a prolonged outbreak of the disease."
Kemp says the Credit Suisse Fellowship Fund has limited exposure to the food manufacturing sector as a whole, predominantly due to its negative criterion on genetically modified foods, although it does have a small holding in pork processor Cranswick.
Kemp says: "So far, the impact on the company has been limited due to the fact that it operates out of Yorkshire, where to date, there has only been one confirmed case of foot-and-mouth. However, if the spread of the disease continues and The Ministry of Agriculture Food and Fisheries reintroduces a total ban on the movement of animals, there will clearly be a knock on effect for Cranswick."
Other areas that will be affected by the crisis, says Kemp, include the dairy companies, as the process of collecting milk will become more time consuming and costly because of the restricted farm access, and the additional costs of hygiene.
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