Tourism goes in cycles and currently we’re climbing to the top of a cycle. No one knows how much further it has to go and, for Britain, perhaps the 2012 Olympic Games will extend the cycle well into the next decade.

But Britain’s tourism industry operates in a global and highly competitive market. If current conditions favour the hospitality industry we must also be aware that the cost of doing business is also rising. Energy costs have soared. Interest rates are rising. The government’s overall tax take is on the increase. Council taxes continue their upward momentum which will almost certainly be increased by new imposts that are likely to be proposed by the Lyons Inquiry into the funding of local authorities. Then there is the promise of green taxes likely to be announced next year.

For the industry, the Lyons Inquiry poses a particular threat – that of a bed tax on hotels in England – and a similar report in Scotland considers giving local authorities the power to impose a tourist tax. The National Minimum Wage has risen faster than average earnings; wage costs already constitute 30 per cent of revenue (higher in Scotland and Wales). The level of VAT is one of the highest in Europe, which puts Britain at a disadvantage when competing with continental Europe.

But above all these increases is the cost of complying with Britain’s regulatory regime. In the last year, the BHA lobbied on more than 20 major government Bills; from the Work and Families Act to the new non-smoking regime in public places. New legislation continues to pour out of government departments, seemingly untrammelled by the workings of the Better Regulation Commission, one of the most toothless Quangos ever established.

Various estimates of the cost of this accumulated regulatory burden have been made, ranging from the government’s own £30bn to twice or three times that amount by organisations such as the CBI. The cost comes not only in spending the management time understanding the implications of new legislation but in the direct cost of complying with it.

Despite high hotel tariffs that make Britain an expensive destination for visitors, no hotel business is currently making excess profits; the return on capital is average. More regulation will impose even greater burdens on businesses in the future. Britain is on its own competing with other, freer economies and there is a real danger that the cost of this regulation could price us out of the market.

Bob Cotton

Chief Executive