Economic
Evaluation of Foot
and Mouth Disease
Final Report
Department of
Agriculture, Food and
Rural Development
Indecon International
Economic Consultants
March 2002
ECONOMIC EVALUATION OF FOOT AND MOUTH DISEASE
FINAL REPORT
Department of Agriculture, Food and Rural Development
Indecon International Economic Consultants
March 2002
©
Copyright Indecon. No part of this document may be used or reproduced without
Indecon’s expressed permission in writing.
Contents
Executive Summary
Page
1
1 Introduction and Background
11
2 Review of Restrictions Introduced
12
First Stage of Restrictions
12
Second Stage of Restrictions
14
3 Economic Effects
16
Agricultural Sector
16
Tourism Sector
19
Exchequer Costs
20
Review of International Research on Economic Impacts of FMD
21
Conclusion
25
4 Estimated Economic Impact on Agricultural Sector
26
Introduction
26
Impact on Agricultural Sector
26
Pig Sector
33
Sheep Sector
39
Beef Sector
45
Second-round Effects
52
Conclusions
53
5 Estimated Economic Impact on Tourism Sector
54
Introduction
54
Visitor Numbers
56
Duration of Stay of Visitors
62
Expenditure per Visitor and Total Revenues
70
Impact of FMD on Domestic Tourism
72
Regional Impacts of FMD
73
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Contents
Quantifying the Costs of FMD to the Tourism Industry
6 Exchequer Costs
Page
76
84
Introduction
84
Costs of Imposing the Restrictions, Culling and Compensation
84
Impact on Tax Receipts
85
7 Impact of FMD in the Absence of Control Measures
Agriculture Sector
89
89
Tourism Sector and Other Sectors
102
Conclusions
103
8 Summary and Conclusions
105
Annex 1
Additional Agriculture Data
113
Annex 2
Additional Tourism Data - Visitor Numbers
118
Annex 3
Deriving Expenditure Per Visitor Data
121
Annex 4
Regional Distribution of Overseas Visitors
124
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ii
Tables
Page
Table 2.1: Summary of Initial Restrictions Introduced in Ireland Arsing from FMD in the UK
13
Table 2.2: Summary of Developments in Phase II
15
Table 3.1: UK Beef Balance Sheet 2000-2001 (‘000 tonnes)
17
Table 3.2: UK Sheep Meat Balance Sheet 2000-2001 (‘000 tonnes)
18
Table 3.3: Economic Effects for the Agricultural Sector
19
Table 3.4: Economic Effects for the Tourism Sector and Other Sectors
20
Table 3.5: Other Negative Effects
21
Table 4.1: Agriculture as a Percentage of GDP, 1999-2001 - €million
26
Table 4.2: Contribution to GDP of Primary Agriculture and Food Sector in 1999 - €million
and as % of GDP
27
Table 4.3: Employment Trends in Agricultural and Food Sector from 1995 to 2000 – Numbers
in Employment (000s)
28
Table 4.4: Employment Trends in Agricultural and Food Sector from 1995 to 2000 – % of
Total Employment
28
Table 4.5: Primary Agricultural Output from 1999 to 2001
€million and as % of Total Agriculture Output
29
-
Table 4.6: Trends in the Value of Livestock Sector
30
Table 4.7: Trends in Prices and Volumes – 2001 to 2000
31
Table 4.8: Selected Exports by Market – 1999
32
Table 4.9: Selected Dairy Exports by Market – 1999
33
Table 4.10: Slaughtering of Pigs 1999-2001 - Units (000s)
34
Table 4.11: Slaughtering of Pigs 1999-2001 – By Carcass Weight (000 tonnes)
34
Table 4.12: Percentage Change in the Value of Pig Meat Exports per Market for 2001
35
Table 4.13: Change in the Value of Pig Meat Exports per Market for 2001 – in € (000s)
36
Table 4.14: Percentage Change in the Value of Live Pig Exports per Market for 2001
37
Table 4.15: Change in the Value of Live Pig Exports per Market for 2001 – in € (000s)
38
Table 4.16: Year-on-Year Changes in the Price of Pigs –
39
Table 4.17: Slaughtering of Sheep 1999-2001 - Units (000s)
40
Table 4.18: Slaughtering of Sheep 1999-2001 – By Carcass Weight (000 tonnes)
40
Table 4.19: Percentage Change in the Value of Sheep Meat Exports per Market for 2001
41
Table 4.20: Change in the Value of Sheep Meat Exports per Market for 2001 – € (000s)
42
Table 4.21: Percentage Change in the Value of Live Sheep Exports per Market for 2001
43
Table 4.22: Change in the Value of Live Sheep Exports per Market for 2001 – € (000s)
44
Table 4.23: Year-on-Year Changes in the Price of Sheep - 2001/2000
45
Table 4.24: Slaughtering of Cattle 1999-2001 - Units (000s)
46
Table 4.25: Slaughtering of Cattle 1999-2001 – By Carcass Weight (000 tonnes)
47
Table 4.26: Percentage Change in the Value of Beef Exports per Market for 2001
47
Table 4.27: Change in the Value of Beef Exports per Market for 2001 (Euros - 000s)
48
Table 4.28: Percentage Change in the Value of Live Cattle Exports per Market for 2001
49
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Tables
Page
Table 4.29: Change in the Value of Live Cattle Exports per Market for 2001 (000s)
50
Table 4.30: Year-on-Year Changes in the Price of Total Cattle- 2001/2000
51
Table 4.31: Summary of Main Impacts of FMD on the Agriculture Sectors in Ireland
53
Table 5.1: Overseas Visitors to Ireland by Route of Travel (000s)
57
Table 5.2: Overseas Visitors to Ireland by Route of Travel - Percentage Change from 2000 to
2001
58
Table 5.3: Overseas Visitors to Ireland by Area of Residence (000s)
59
Table 5.4: Overseas Visitors to Ireland by Area of Residence - Percentage Change from 2000
to 2001
60
Table 5.5: Overseas Visitors to Ireland by Reason for Journey (000s)
61
Table 5.6: Overseas Visitors to Ireland by Reason for Journey - Percentage Change from 2000
to 2001
61
Table 5.7: Overseas Visitors to Ireland by Non-Residents (More Than One Day) - Average
Length of Stay by Route of Travel (Nights)
63
Table 5.8: Overseas Visitors to Ireland by Non-Residents (More Than One Day) - Percentage
Change in Average Length of Stay by Route of Travel (%)
64
Table 5.9: Overseas Visitors to Ireland by Non-Residents (More Than One Day) - Average
Length of Stay by Area of Residence (Nights)
65
Table 5.10: Overseas Visitors to Ireland by Non-Residents (More Than One Day) - Percentage
Change in Average Length of Stay by Area of Residence (%)
66
Table 5.11: Overseas Visitors to Ireland by Non-Residents (More Than One Day) - Average
Length of Stay by Reason for Journey (Nights)
66
Table 5.12: Overseas Visitors to Ireland by Non-Residents (More Than One Day) - Percentage
Change in Average Length of Stay by Reason for Journey (%)
67
Table 5.13: Overseas Visitors to Ireland by Non-Residents (More Than One Day) - Number of
Bednights Classified by Type of Accommodation Used
68
Table 5.14: Overseas Visitors to Ireland by Non-Residents (More Than One Day) - Percentage
Change in Number of Bed-nights Classified by Type of Accommodation Used
(%)
69
Table 5.15: Expenditure per Tourist by Place of Residence 1996-2000 (€)
70
Table 5.16: Estimated Earnings from all Visitors to Ireland - € Million
71
Table 5.17: Estimated Earnings from all Visitors to Ireland - Percentage Change from
Previous Year (%)
72
Table 5.18: Domestic Tourism Data - January to August - 1997 to 2001
73
Table 5.19: Percentage Change in Overseas Visitor Numbers Between 2000 and 2001 for
January to August Period by Region
74
Table 5.20: Hotel Occupancy Rates - 1999 to 2001
75
Table 5.21: Hotel Room Occupancy Rates by Region (%)
75
Table 5.22: Initial Indicative Estimated Losses in Overseas Tourism Revenues Due to FMD
77
Table 5.23: Estimated Average Annual Growth Rates in the Number of Overseas Visitors to
Ireland between 1996 and 2000 by Market
78
Table 5.24: Estimated Decrease in Overseas Visitors to Ireland in First Half of 2001 by
Market (000s)
79
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Tables
Page
Table 5.25: Estimated Total Decrease in Revenues from Reduced Overseas Visitor Numbers
in the first half of 2001 by Market
80
Table 5.26: Estimated Change in Domestic Tourist Trips Between 2000 and 2001 – January to
August Period
81
Table 5.27: Estimate Change in Domestic Tourist Trips Between 2000 and 2001 Assuming
Growth in the Domestic Tourist Market – January to August Period
81
Table 5.28: Estimate Change in Domestic Tourist Trip Revenues Between 2000 and 2001
Assuming Growth in the Domestic Tourist Market – January to August Period
82
Table 5.29: Summary of Main Impacts of FMD on the Tourism Industry and Other Sectors in
Ireland
83
Table 6.1: Exchequer Costs of FMD
84
Table 6.2: Year-on-Year Percentage Change in Tax Receipts - 2000 to 2001
86
Table 6.3: Cumulative Year-on-Year Change in Tax Receipts - 2000 to 2001
87
Table 6.4: Summary of Total Economy Costs of FMD
88
Table 7.1: The Effects of a Full-Scale Outbreak of FMD in Ireland
89
Table 7.2: Potential Agriculture Products Liable to EU Export Ban
90
Table 7.3: Distribution of Irish Agriculture Exports - € and %
91
Table 7.4: Estimated Short Run Impact of FMD Related Export Ban – Value of Resulting
Exports Reduction
94
Table 7.5: Estimated Short Run Impact of FMD Related Export Ban – Value of Resulting
Exports Reduction as a proportion of GDP
95
Table 7.6: Estimated Short Run Impact of FMD Related Export Ban Assuming Alternative
Use of Agriculture Resources
96
Table 7.7: Estimated Employment Impact of Export Bans of Different Durations on Different
Sectors – Job Losses
97
Table 7.8: Estimated Employment Impact of Export Bans of Different Durations on Different
Sectors – Job Losses Assuming Labour Hoarding
98
Table 7.9: Proportion of Livestock Slaughtered in UK in 2001
99
Table 7.10: Livestock Numbers - December 2000 (‘000)
99
Table 7.11: Overall Costs of Culling and Disposal
100
Table 7.12: Value of Slaughtered Stock
100
Table 7.13: Other Effects of a Full-Scale Outbreak of FMD in Ireland
102
Table 8.1: Summary of Main Impacts of FMD on the Agriculture Sectors in Ireland
106
Table 8.2: Summary of Main Impacts of FMD on the Tourism Industry and Other Sectors in
Ireland
108
Table 8.3: Exchequer Costs of FMD
108
Table 8.4: Summary of Total Economy Costs of FMD
110
Table A1.1: Year-on-Year Changes in the Price of Prime Cattle- 2001/2000
114
Table A1.2: Monthly Changes in Prime Cattle Prices
114
Table A1.3: Year-on-Year Changes in the Price of Cows for Slaughter - 2001/2000
115
Table A1.4: Monthly Changes in Cow Slaughter Prices
115
Table A1.5: Year-on-Year Changes in the Price of Store Cattle- 2001/2000
116
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Tables
Page
Table A1.6: Monthly Changes in Store Cattle Prices
116
Table A1.7: Trends in Purchase for Destruction Scheme - 2001
117
Table A2.1: Overseas Visitor Numbers (000s) - 2001
118
Table A2.2: Overseas Visitor Numbers (000s) - 2000
119
Table A2.3: Overseas Visitor Numbers - Percentage Change from 2000 to 2001
119
Table A2.4: North American Data
120
Table A3.1: Tourism Numbers by Area of Residence - 1996-2000 (000s)
121
Table A3.2: Tourism Revenues by Area of Residence - 1996-2000 (€m)
122
Table A3.3: Expenditure per Tourist by Place of Residence 1996-2000 (€)
123
Table A4.1: Regional Distribution of Overseas Visitors (%)
124
Table A4.2: Regional Distribution of Overseas Visitors (000s)
125
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vi
Section 0
Executive Summary
Executive Summary
Introduction
The outbreak of Foot and Mouth Disease (FMD) in the early part of
2001 led to the introduction by the Irish Government of a range of
measures that had consequences for economic activity. A number of
sectors were affected, but primarily the agriculture and tourism
sectors.
This study has undertaken a detailed economic evaluation of the
effects of the FMD outbreak, and in particular:
-
Estimates the economic impacts of FMD and the control
measures introduced on the main sectors affected and on the
Exchequer; and
-
Provides an estimate of the likely economic impacts on these
sectors if the control measures had not been taken.
In examining the economic impact of FMD on the Irish economy,
this study has focused on three main areas;
-
Agriculture sector;
-
Tourism sector;
-
Exchequer costs.
Agriculture Sector
There are a range of different effects on the agricultural sector arising
from the restrictions introduced as a consequence of the FMD
outbreak and the precautionary measures undertaken. The main
restrictions during the first phase of the scare included the closure of
marts and the ban on the movement of all susceptible animals except
those destined for slaughtering, or being moved for welfare reasons.
This led to an increase in farm costs, as animals that were due for
sale were kept on farm for longer than anticipated.
Arising from the outbreak in Louth, a key effect was the ban on
exports from the country as a whole to markets outside the EU. This
primarily affected the pig and dairy sectors as the beef sector was
already excluded from these markets. These bans had the potential
to reduce export values and lead to a reduction in farm incomes and
related economic activity. These bans were introduced in March and
for some countries still remain.
A third effect arose from a ban on exports to the EU from Louth,
which began in March. This clearly had a devastating effect on the
incomes of farms in the affected areas. The effect on the economy as
a whole is less clear as it depends on whether this supply could be
met from other areas of the country. To the extent that other regions
met the shortfall then the overall effect on national income would be
reduced.
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Section 0
Executive Summary
Finally, the loss of stock due to the culling of animals in Louth
represents a loss to the sector and to the economy. It is estimated
that the culling within the Cooley Peninsula accounted for 48,744
sheep, 166 goats, 1,123 cattle, 2,908 pigs, and 280 deer. Outside the
Peninsula there were 3,826 sheep and 207 cattle culled. It will take
time to replace the lost stock and this represents an economic loss.
There is also the cost to the Exchequer of the scheme that was put in
place to compensate farms for the loss of stock.
Arising from the impact of FMD internationally, the FMD outbreak
also provided some benefits to the agriculture sector in Ireland.
These arose from the impact on output and prices due to FMD in the
UK and to a lesser extent in the Netherlands and France.
The outbreak of FMD in the UK led to a large fall in UK livestock
output. This provided an opportunity to exporting countries as UK
imports of beef and pigs increased. In so far as Irish exporters filled
this gap, this led to an increase in exports and incomes and
represents an indirect benefit to the Irish economy from FMD.
There was also a widespread ban on UK exports to the EU (including
imports of sheep and cattle from Northern Ireland to Ireland) and to
third country markets. This also provided an opportunity for Irish
exporters (apart from beef) to fill the gap caused by the UK exports
ban.
In summary then, the following represent the main economic effects
of FMD on the agriculture sector:
-
Costs due to the restriction on livestock movements;
-
Income loss for pig and dairy sectors due to export ban to
some non-EU markets;
-
Loss of income due to export ban on animals and products
from Louth;
-
The costs of the stock lost due to culling;
-
Higher export volumes to the UK;
-
Higher export volumes to the EU;
-
Higher prices for livestock.
Livestock Sectors
Overall, the available data suggest that the livestock sectors had a
good year in 2001 with strong growth in the pig and sheep sectors,
offset somewhat by the BSE-related difficulties in the beef sector. On
the basis of our overall analysis, it appears that the FMD outbreak
did not have a significant impact on overall incomes in the main
livestock sectors that were most exposed. Detailed disaggregated
analyses are also undertaken for the pig, sheep, and cattle sectors.
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Executive Summary
The analysis of the pig sector in Ireland suggests that it benefited
marginally from the FMD outbreak. Total pig exports for the first
three quarters of the year were higher by €12 million. It is clear that
not all of the higher export values are due to FMD effects, however,
but it may be reasonable to assume that about 75 % of the increase
can be attributed to FMD consequences. This is equivalent to about
€9 million for the first three quarters of the year.
For the sheep sector, total exports in value terms increased primarily
due to higher prices and to a lesser extent higher exports to the UK.
These factors combined led to an increase in export values of around
€47.5 million for the first three quarters of the year. If it is assumed
that 50 % of these gains are attributable to FMD, then this implies an
increase to the sheep sector of €23.7 million.
The analysis in this report suggests that the beef sector suffered
another difficult year in 2001. Exports to the EU and non-EU
countries fell due to the on-going effects of BSE. However the FMD
situation in the UK provided a minor boost to the sector. Exports to
the UK increased by €50 million and prices were also firmer than
expected due to the reduction in UK supply. In addition, higher UK
exports reduced the Exchequer cost of the Purchase for Destruction
Scheme (PFD).
As with the pig and sheep sectors, it could be argued that the beef
sector indirectly benefited from the FMD outbreak in the UK. It is
estimated these benefits are in the region of €30 million for the Irish
economy.
Overall Impact on Agriculture Sector
It is extremely difficult to isolate the effects of FMD on the
agriculture sector. There are a number of effects that need to be
considered including:
-
A ban on exports to non-EU countries;
-
Higher exports to the UK; and,
-
Higher prices due to lower UK output.
On balance, it is felt that Irish agriculture benefited marginally due
to the FMD-related reduction in UK output. It is estimated that
export values were higher by about €63 million.
These higher values would also have second round effects for other
sectors. These second round effects are estimated to add a further
€44 million to the overall benefit estimates of the FMD outbreak to
the agriculture sector. Thus, the best indicative estimate is that there
were agriculture-related benefits from FMD of around €107 million.
These are summarised in Table A.
In addition, there are some further costs due to the closure of Marts
and the restrictions on animal movements. These costs, which are
difficult to quantify, would tend to reduce these estimated benefits.
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February 2002
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Section 0
Executive Summary
However, these benefits relate only to the period up to endSeptember 2001. As the supply of livestock in the UK is unlikely to
reach pre-FMD levels for some time, the benefits to the agricultural
sector in Ireland are likely to extend beyond this period while costsrelated to the closure of some third-country markets will also extend
beyond September.
Table A: Summary of Main Impacts of FMD on the Agriculture
Sectors in Ireland
Estimated Losses/Gains
•
•
•
•
•
•
Pig
Sheep
Beef
First Round Total
Second Round Impacts
Total Gains
€ Million
9
24
30
63
44
107
Source: Indecon analysis
Tourism Sector
FMD also had important consequences for the tourism sector.
Firstly, a number of sporting, business, and cultural events were
cancelled, and businesses and heritage centres closed, in response to
the restrictions imposed and this led to a reduction in the number of
overseas visitors. Furthermore, Government campaigns in Ireland
and the UK initially discouraged people from travelling between the
two countries. This had a direct effect on the sector. Transport
companies and hotels/guesthouses were adversely affected, in
addition to indirect effects on pubs and restaurants and key elements
of the services sectors.
Secondly, overseas tourist numbers were reduced by the negative
publicity surrounding the outbreak of FMD in the United Kingdom.
The widespread negative publicity associated with the culling led to
the perception that the UK countryside was off limits and this
perception also damaged the Irish market. Even in the absence of
the actual restrictions on activities, it is reasonable to assume that
Ireland’s tourist interests would have suffered.
In general terms, the economic effects of FMD for the tourism sector
include the following:
-
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February 2002
Direct income loss due to the decline in overseas visitors;
4
Section 0
Executive Summary
-
Indirect income loss due to the decline in overseas visitors;
-
Income effects arising from changes in domestic tourism
patterns;
-
Other domestic effects.
Tourism Sector Performance
Overseas visitor numbers were 2.4 % lower in the first quarter of
2001 than in the first quarter of 2000, and were 6.8 % lower in the
second quarter of 2001 than in the second quarter of 2000.
Furthermore, the decline in overseas visitor numbers is most marked
for those travelling cross-Channel by sea. The data also shows that
the proportionate decrease in visitor numbers is considerably greater
for those resident in Great Britain. This suggests that the FMD
effects and restrictions in both the UK and Ireland reduced the
number of visitors to Ireland.
The average length of stay by non-resident overseas visitors to
Ireland showed year-on-year percentage changes of –4.3% and 1.4%
in the first and second quarters of 2001 respectively. The data also
shows that there is considerable variation in the average length of
visits depending on the area of origin of visitors, with those
travelling from Great Britain spending the least time on average.
Furthermore, the average length of stay by visitors from Great
Britain fell by 11 % between the first quarters of 2000 and 2001, and
by 5.5 % between the second quarters of 2000 and 2001.
An analysis of domestic tourism trips and revenues for the period
from January to August suggests that for the first three-quarters of
2001 over 2000, there was an increase in total trips of 11.8 %, and an
increase in domestic revenues of 16.3 %. These numbers suggest that
FMD may have given a boost to domestic tourism as more people
decided to holiday at home.
Another important consideration involves assessing the regional
impacts of FMD. Indicators suggest that there is considerable
regional variation, and that in general rural areas seem to be doing
worse.
Impact of FMD on Tourism Sector
The analysis in this report indicates that overall overseas tourism
revenues showed a year-on-year increase in the first half of 2001,
despite the fact that visitor numbers fell during the period. It is
plausible to assume that in the absence of FMD, these revenues
would have increased further. To calculate these lost revenues, our
analysis considers the number of overseas and domestic tourists that
would have holidayed in Ireland in 2001 had FMD not occurred, and
compares this to the actual levels. Table B presents a summary of
estimated tourism industry losses due to FMD.
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February 2002
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Section 0
Executive Summary
Table B: Summary of Main Impacts of FMD on the Tourism
Industry and Other Sectors in Ireland
Estimated Tourism (Losses)/Gains
•
•
•
•
•
•
Overseas visitor market
Domestic tourist market
Other Sectors
First round Total
Second round tourism impacts
Total
€ Million
(97)
9
(25)
(113)
(97)
(210)
Source: Indecon analysis
Overall the total loss to the tourism sector as a result of FMD is
estimated to be in the region of €210 million, with a heavy
concentration in the rural economy. This relates to the loss for the
six months to the end of September 2001. It is likely that the negative
impact of FMD for the tourism sector extended beyond this period.
Exchequer Costs
Finally, a range of costs to the Exchequer arising from FMD was also
assessed. These include the actual costs of introducing the various
restrictions. Officials from the Department of Agriculture, Food, and
Rural Development, and other Departments and Members of the
Gardaí and the Army were involved in these operations. These
include the ring fencing of the border, controls at ports and airports.
The actual cost of imposing the various restrictions is the first cost to
be considered. Officials from a number of Government Departments
and agencies undertook a comprehensive operation at the air and
seaports. This led to direct costs in terms of overtime payments and
also to costs due to the work forgone during the operations. Costs
were also incurred during the culling of animals in the Cooley
Peninsula. Furthermore, in response to the FMD outbreak, the State
introduced a compensation scheme that was fully funded by the
Irish Exchequer.
The latest estimates from the Department of Agriculture, Food and
Rural Development suggest that expenditure by the Department in
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February 2002
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Section 0
Executive Summary
relation to FMD amounted to €44 million. This includes payments
amounting to €10 million in relation to compensation, €16 million in
relation to general expenses, and staff costs (overtime, travel and
subsistence) of €18 million. These estimates exclude the cost of work
forgone during the FMD scare by Departmental officials.
In response to the crisis facing the tourism sector, there was an
additional allocation made to the budget for promoting Irish
tourism. This amounted to a cost of €13 million in the year 2001. We
understand that savings elsewhere in the tourism budget in part
funded this. Nevertheless, the full amount is accounted as a FMD
related Exchequer expenditure.
The Gardaí estimate that overtime amounted to €50 million.
FMD also affected the Exchequer’s tax take, particularly in the case
of excise duties where the disruption in cross-border trade may have
been a factor. However, these tax trends are also influenced by
wider economic trends and it is not possible to isolate specific FMD
effects. On balance, it would seem that FMD contributed to an
already slowing economy and adversely affected excise duty
receipts. While we do not put an exact figure on this Exchequer cost,
it is likely to be significant.
Overall it is estimated that exchequer costs amounted to €107
million.
Overall Costs of FMD to Irish Economy
A summary of the total impact/costs of the FMD outbreak and the
restrictions imposed in Ireland is presented in Table C. Overall,
costs are estimated at €210 million, or approximately 0.2 % of GDP.
Table C: Summary of Total Economy Costs of FMD
Estimated Gains and (Losses)
€ Million
•
Agriculture
•
Tourism and other Sectors
(210)
•
Exchequer Costs
(107)
•
Total
(210)
•
Total as % of GDP
0.2%
107
Source: Indecon analysis
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February 2002
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Section 0
Executive Summary
Impact of FMD in the Absence of Control Measures
The second element of this Study involves estimating the likely
economic impacts on the main sectors of the Irish economy if control
measures had not been introduced. This requires specification of the
counterfactual of a widespread outbreak of FMD in Ireland.
Agriculture Sector
A widespread outbreak would have a significant effect on the
agricultural sector. These effects include:
-
A ban on all exports of susceptible products to the EU and to
non-EU countries;
-
A comprehensive programme of culling and disposal of
animals;
-
A loss of stock and damage to Ireland’s reputation as a food
producer.
Indicative estimates suggest that in a best-case scenario of a
worldwide 3 month export ban, the reduction in exports would be
equal to €0.9 billion. If, however, non-EU markets imposed a longer
6 month ban, the overall cost would amount to €1.2 billion.
If we assume however that redundant resources would be employed
in other sectors of the economy, then in the best-case scenario the
estimates suggest a decrease of 0.6 % of GDP (or €0.6 billion). In the
worst-case scenario, specifically a one-year ban in UK and other EU
markets, and a two- year ban in non-EU markets, the total loss is
estimated at 3.2 % of GDP (or €3.3 billion). Second round effects are
estimated to add a further €0.4 billion (best case scenario) to €2.3
billion (worst case scenario) to these initial first round estimates.
Hence, overall GDP would be reduced by 0.96 % (€1 billion) and 5.4
% (€5.6 billion) respectively. These costs are outlined in Table D.
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Executive Summary
Table D: Summary of Costs of FMD to Agriculture Sector in the
Event of a Widespread Outbreak
Estimated Losses - € Billion
Best Case
Scenario
Worst Case
Scenario
•
Export ban losses
0.9
4.97
•
Export ban losses assuming
alternative use of resources
0.6
3.3
•
Second round effects
0.4
2.3
•
Total costs
1
5.6
•
Total costs - % of GDP
0.96%
5.4%
Source: Indecon analysis
It should also be noted that the costs estimated in this study assume
there is no intervention. This assumption could be challenged but
for the purposes of this exercise this is a reasonable assumption.
According to the estimates presented in this report, total job losses in
the agriculture sector would range between a best-case scenario of
550 job losses to the worst-case scenario of 12,200. The majority of
job losses are estimated to be in the meat sector.
In terms of estimating the costs of culling and disposal of a
widespread in Ireland, it is assumed that the same proportion of the
Irish stock as in the UK is destroyed as result of the outbreak. This
implies that 336,000 Cattle, 395,000 sheep and 38,000 pigs would be
destroyed in the event of a widespread outbreak. The cost of culling
and disposal of these animals is estimated at €13.1 million.
Furthermore, the value of the slaughtered animals is estimated at
€263.7 million.
A number of potential longer-term effects were also considered.
Firstly, Ireland has a reputation as a producer of good quality food.
A widespread outbreak could damage Ireland’s reputation in export
markets even after the export bans have been removed. This could
damage future prospects in a number of markets that generate
significant export earnings. This effect is hard to quantify but is an
important consideration.
Secondly, the lost stock would affect the sectors for a number of
years as stocks are replenished. Evidence from the UK suggests that
it would be 2003/2004 before stocks levels start to return to previous
Indecon
February 2002
9
Section 0
Executive Summary
levels. This implies that export earnings may be below pre-FMD
levels for some time.
Finally, it could be argued that the reduction in Irish supply would
lead to higher prices on international markets. This depends on
whether Irish agriculture is considered to be a price-taker or whether
it has some market power. On balance, it is felt that some sectors are
significant players and that a reduction in Irish supply would lead to
higher prices. Once again, though, this is a marginal effect and is not
as important as the other medium to longer-term issues examined.
Tourism and Other Sectors
The tourism sector was severely affected by the FMD restrictions put
in place and an examination of the Government’s response suggests
that the restrictions introduced were exhaustive. It is unlikely that
additional measures would have been implemented in the event of a
widespread outbreak.
However, it is clear that these restrictions would have been in place
for a longer period and this would have extended the period during
which the tourism sector suffered a loss of business. Thus, it is
concluded that a widespread outbreak would also have been
damaging for the tourism sector. Also, the longer-lasting restrictions
would have affected the non-tourist-related elements of the domestic
economy such as sporting events etc.
Moreover, the tourism sector would have been affected by the
negative publicity surrounding the widespread culling and disposal
of animals. This would exacerbate the view that the countryside
was a no-go area.
It is concluded that a widespread outbreak would have led to further
losses for the Tourism sector and other part of the economy.
Overall Impact of FMD in the Absence of Control Measures
In the event of a widespread outbreak of FMD, overall GDP would
be reduced by between 0.96 % (€1 billion) and 5.4 % (€5.6 billion)
through the impact on the agriculture sector. A widespread
outbreak would also have significant negative implications for the
tourism sector and for non-tourist-related elements of the domestic
economy such as sporting events etc.
Acknowledgements
Special thanks are due to officials at the Department of Agriculture,
Food and Rural Development, and at the Department of Tourism,
Sport and Recreation. We also acknowledge with thanks the
assistance of staff at the CSO, Bord Failte, the Irish Tourist Industry
Confederation, and other industry representatives.
The usual disclaimer applies however and this report is the sole
responsibility of Indecon.
Indecon
February 2002
10
Section 1
Introduction and Background
1
Introduction and Background
1.1
The background to the current study is the outbreak of Foot and
Mouth Disease (FMD) in the UK, the Netherlands, France and Ireland
in the early part of 2001. This outbreak led to the introduction by the
Irish Government of a range of measures that had consequences for
economic activity. A number of sectors were affected, but primarily
the agriculture and tourism sectors.
1.2
Indecon International Economic Consultants have been retained by
the Department of Agriculture, Food and Rural Development to
undertake an economic evaluation of the effects of the FMD outbreak.
The overall objectives of the study are to:
1.3
•
Estimate the economic impacts of FMD and the control
measures introduced on the main sectors affected and on the
Exchequer; and
•
Provide an estimate of the likely economic impacts on these
sectors if the control measures had not been taken.
The Call for Tenders specified the following specific objectives for the
proposed study:
•
Identify the range of economic impacts of Foot and Mouth and
the various control measures;
•
Assemble the available data on these impacts on the sectors
and the Exchequer;
•
Estimate such impacts where cost and benefit information is
not available;
•
Provide an estimate of the likely economic impacts on these
sectors if the control measures had not been taken.
1.4
The Study is set in two parts. Part One assesses the economic effects
of the FMD outbreak and the restrictions that were introduced. Part
Two considers the likely economic impacts if the control measures
had not been taken.
1.5
Special thanks are due to officials at the Department of Agriculture,
Food and Rural Development, and at the Department of Tourism,
Sport and Recreation. We also acknowledge with thanks the
assistance of staff at the CSO, Bord Failte, the Irish Tourist Industry
Confederation, and other industry representatives.
1.6
The usual disclaimer applies however and this Report is the sole
responsibility of Indecon.
Indecon
February 2002
11
Section 2
Review of Restrictions Introduced
2
Review of Restrictions Introduced
2.1
The Foot and Mouth crisis began with an outbreak in the United
Kingdom (UK) on February 21, 2001 and led to the introduction by the
Irish Government of a range of restrictions that affected economic
activity in Ireland. These restrictions were increased as the crisis
deepened and were subsequently relaxed as the immediate fears of a
widespread outbreak in Ireland abated.
2.2
In assessing the economic impact of FMD it is important to have
regard to the chronology of events and the duration of the various
restrictions. The timing and duration of these will have a significant
bearing on the overall estimates of the impacts.
2.3
In this section we briefly review these restrictions. In subsequent
sections the potential economic effects are identified.
First Stage of Restrictions
2.4
It is useful to consider the restrictions in two Stages. Stage One of the
response to FMD refers to the restrictions that were introduced prior
to the outbreak in Louth in March. Stage Two refers to the additional
measures taken after the outbreak was confirmed. These include a
limited culling of animals and a limited export ban.
2.5
The first set of restrictions was introduced in the third week of
February when the first FMD cases were confirmed in the UK. These
first measures led to a restriction and enforcement of the ban on
imports from the UK of cattle, sheep, pigs, goats and deer and on a
range of products from such animals. On February 26 a nationwide
ban on sales at livestock marts was enforced and controls on the
importation of used farm machinery from the UK were introduced.
These restrictions primarily had an impact on the agricultural sector.
2.6
Further restrictions were announced which impacted upon other
sectors of the economy.
Various sporting and cultural events in
Ireland were cancelled and visitors from affected areas in the UK were
discouraged from travelling to Ireland. The IRFU cancelled the Wales
v Ireland rugby match at the beginning of March and all horseracing
and greyhound events were cancelled. In addition, a request was
made by the Government that various sporting, cultural and other
activities be cancelled/postponed. This request was met positively
throughout the country and had a significant impact on sporting and
cultural events.
Indecon
February 2002
12
Section 2
Review of Restrictions Introduced
2.7
While detailed information on the number of events cancelled is not
available, it is our understanding that a large number of events were
either cancelled or postponed through this initial period. In addition,
a number of business events and conferences were also adversely
affected. This had a significant effect on activity across a range of
business and service sectors.
2.8
As the concerns grew about the potential impact in Ireland, further
restrictions were introduced at the end of February. The Department
of Agriculture, Food and Rural Development introduced a “permit
system” which only allowed animals, other than those going for direct
slaughter, to move in exceptional circumstances e.g. welfare reasons.
A control zone was also established in north Louth and movements of
animals within this area were prohibited. Moreover, this area was
placed under veterinary supervision.
2.9
A summary of the principal restrictions is set out in Table 2.1.
Table 2.1: Summary of Initial Restrictions Introduced in Ireland
Arsing from FMD in the UK
Feb 21
Ban on imports from the United Kingdom including Northern
Ireland of cattle, sheep, pigs, goats and deer and on a range of
animal products from such animals.
Feb 23
Ban was imposed on livestock marts in border counties and on
hunting.
Feb 26
Temporary nationwide ban on sales at livestock marts and
controls on the importation of used farm machinery from Great
Britain.
Feb 27
The IRFU cancelled the Wales v Ireland rugby.
Requests made that all horseracing, including point-to-point
events, and all greyhound events be cancelled.
Feb 28
Ban introduced on movement of all susceptible animals within
the country other than those going direct for slaughter.
Requests that various sporting, cultural and other activities be
cancelled/postponed.
A control zone was established in north Louth. Movement of
animals into, out of, and inside this area was prohibited and the
area placed under veterinary supervision.
Mar 7
Movement permit system put in place allowing animals to move
only in exceptional circumstances e.g. welfare reasons.
Source: Department of Agriculture, Food and Rural Development
Indecon
February 2002
13
Section 2
Review of Restrictions Introduced
Second Stage of Restrictions
2.10
On March 22, 2001 the Minister for Agriculture, Food and Rural
Development confirmed an outbreak of FMD in the sheep flock at
Proleek near Jenkinstown, Co Louth. This led to the introduction of a
range of additional measures including further restrictions on
livestock movements, a programme of culling in the affected area, and
a limited suspension of some exports of animal products.
2.11
A key element of this phase involved a cull of animals in the area. On
March 26th, the slaughter of all sheep and wildlife within a 3 km
radius of the outbreaks in Meigh, Co. Armagh and Proleek, Co. Louth
commenced. A few days later a compulsory cull of all sheep in the
Cooley region was announced. In addition, a strategic cull of some
cattle in the region was undertaken as a precautionary measure.
2.12
The outbreak also led to a limited export ban. The EU Commission
imposed a ban on all exports of non-treated meat and dairy products,
and as a result of the actions already taken this was confined to Co.
Louth. A number of non-EU countries however introduced a wider
ban on all susceptible exports from the county as a whole. This latter
measure hit the dairy and pig sectors where there are significant
exports to non-EU markets. The important beef sector was unaffected
by this ban as it was already excluded from these markets due to the
BSE scare.
2.13
By April a number of the restrictions started to be eased. It was
announced that the postponed St Patrick's Day festivities were to take
place on the 18th to 21st May. It was also decided that greyhound
racing would resume on a limited basis with effect from the 19th April
with show jumping due to resume on a limited basis with effect from
28th April.
2.14
By April 19th the trade restrictions, which applied to Co. Louth, were
removed with the exception of the restrictions in place within a 10km
zone around Proleek and in the Cooley peninsula. At the beginning of
May, the Minister announced the opening of marts with effect from
1st June as assembly centres for farm-to-farm cattle movement and as
assembly centres for export. By end-May a number of non-EU
markets were re-opened.
2.15
A summary of these principal restrictions is set out in Table 2.2.
Indecon
February 2002
14
Section 2
Review of Restrictions Introduced
Table 2.2: Summary of Developments in Phase II
Mar 22
(Single outbreak involving two sheep confirmed in Co Louth.)
EU Commission agrees to limit trade ban to exports of non-treated
meat and dairy products from Co Louth.
Limited Export Ban to non-EU countries.
Mar 23
Accelerated strategic cull within 1 km and 3km zones of confirmed Co.
Louth case.
Mar 26
Commencement of the slaughter of all sheep within, and between, 3
km radius zones centred on sites of outbreaks and Meigh, Co. Armagh
and Proleek, Co. Louth.
April 1
Compulsory cull of all sheep in Cooley region together with some
cattle announced.
April 11
St Patrick’s Day festivities to take place on the 18th to 21st May
Greyhound racing to resume on a limited basis with effect from the
19th April on basis of Expert Group agreed protocol.
Show jumping to resume on a limited basis with effect from 28th April.
April 19
Trade restrictions applying to Co. Louth are removed with the
exception of the restrictions in place within 10km zone around Proleek
and in Cooley peninsula.
April 30
All FMD trade restrictions lifted from Ireland.
May 1
Further easing of FMD restrictions announced including the use of
marts with effect from 1 June as assembly centres for farm to farm
cattle movement and as assembly centres for export; the reduction
interval between inward and outward movement in a herd from 20
days to 7 days and the controlled resumption of sheep shearing from
28 May.
End-May
Re-opening of certain third country markets.
June 18
Marts re-opened.
Source: Department of Agriculture, Food and Rural Development
Indecon
February 2002
15
Section 3
Economic Effects
3
Economic Effects
3.1
In this section the economic impacts of these various restrictions are
identified, and a review of international research on the economic
impacts of FMD is provided. This provides the background to
estimating these impacts in subsequent chapters.
Agricultural Sector
3.2
There are a range of different effects on the agricultural sector arising
from the restrictions introduced as a consequence of the FMD
outbreak and the precautionary measures undertaken. The main
restrictions during the first phase of the scare included the closure of
marts and the ban on the movement of all susceptible animals except
those destined for slaughtering, or being moved for welfare reasons.
This led to an increase in farm costs, as animals that were due for sale
were kept on farm for longer than anticipated.
3.3
Arising from the outbreak in Louth, the second key effect was the ban
on exports from the country as a whole to markets outside the EU. As
discussed, this primarily affected the pig and dairy sectors as the beef
sector was already excluded from these markets. These bans reduced
export values and led to a reduction in farm income and related
economic activity. These bans were introduced in March and for
some countries still remain and as we will show had a detrimental
effect on a number of sectors.
3.4
The third effect arose from a ban on exports to the EU from Louth,
which began in March. This clearly had a devastating effect on the
incomes of farms in the affected areas. The effect on the economy as a
whole is less clear as it depends on whether this supply could be met
from other areas of the country. If other regions met the shortfall then
it could be argued that there is no overall effect on national income.
This issue will be explored in the next chapter.
3.5
Finally, the loss of stock due to the culling of animals in Louth
represents a clear loss to the sector and to the economy. It is estimated
that the culling within the Cooley Peninsula accounted for 48,744
sheep, 166 goats, 1,123 cattle, 2,908 pigs, and 280 deer. Outside the
Peninsula there were 3,826 sheep and 207 cattle culled. It will take
time to replace the lost stock and this represents an economic loss.
There is also the cost to the Exchequer of the scheme that was put in
place to compensate farms for the loss of stock.
Indecon
February 2002
16
Section 3
Economic Effects
3.6
All these effects are clearly negative. Arising from the impact of FMD
internationally, the FMD outbreak also provided some benefits to the
agriculture sector in Ireland. These arise from the impact on output
and prices due to FMD in the UK and to a lesser extent in the
Netherlands and France.
3.7
The outbreak of FMD in the UK led to a large fall in UK livestock
output. This provided an opportunity to exporting countries as UK
imports of beef and pigs increased. In so far as Irish exporters filled
this gap, this led to an increase in exports and incomes and represents
an indirect benefit to the Irish economy from FMD.
3.8
There was also a widespread ban on UK exports to the EU (including
imports of sheep and cattle from Northern Ireland to Ireland) and to
third country markets. This also provided an opportunity for Irish
exporters (apart from beef) to fill the gap caused by the UK exports
ban.
3.9
Data are available on the extent of this “supply gap”. Table 3.1 shows
estimates of the UK Beef Balance Sheet for 2000 to 2001. This shows
an increase in imports to the UK of 32% in 2001, or 65,000 tonnes of
beef, for the first three quarters.
Table 3.1: UK Beef Balance Sheet 2000-2001 (‘000 tonnes)
2000
20011
Production
708
636
Imports
205
270
Exports
0
0
958
916
Consumption
Source: Meat and Livestock Commission
3.10
1
Comparable data are available for the sheep sector and are set out in
Table 3.2. These show that both production and exports fell while,
surprisingly, imports also fell. On balance, it shows that the fall in
exports in the UK may have provided an opportunity for other
exporting countries.
Autumn estimates.
Indecon
February 2002
17
Section 3
Economic Effects
Table 3.2: UK Sheep Meat Balance Sheet 2000-2001 (‘000 tonnes)
2000
20012
Production
359
263
Imports
123
112
Exports
97
22
Consumption
391
353
Source: Meat and Livestock Commission
3.11
Apart from the effect on the volume and flow of trade activity, lower
output from the UK also had an effect on livestock prices on
international markets. There was a dramatic increase in livestock
prices during 2001 partly related to FMD. These higher prices led to
higher export values and helped to support farm incomes. Of course,
there was a potential negative effect for the economy as domestic
consumers faced higher food prices. Nevertheless, given our status as
a food exporter, an increase in export prices leads to an improvement
in the country’s overall terms of trade and this represents an
unambiguous gain to the national economy.
3.12
Thus, the outbreak of FMD led to a number of consequences and
contrary to expectations not all of these are negative. The main
potential effects for the agricultural sector are summarised in Table
3.3. This will be examined in more detail in the next chapter.
2
Autumn estimates.
Indecon
February 2002
18
Section 3
Economic Effects
Table 3.3: Economic Effects for the Agricultural Sector
1.
Costs due to the restriction on livestock movements
2.
Income loss for pig and dairy sectors due to export ban to
some non-EU markets
3.
Loss of income due to export ban on animals and products
from Louth
4.
The costs of the stock lost due to culling
6.
Higher export volumes to the UK
7.
Higher export volumes to the EU
8.
Higher prices for livestock
Source: Indecon
Tourism Sector
3.13
The FMD scare also had significant implications for the tourism
sector. This arises from two-related effects.
3.14
Firstly, a number of sporting and cultural events were cancelled, and
businesses and heritage centres closed, in response to the restrictions
imposed and as discussed in the previous section which led to a
reduction in the number of overseas visitors. Also, Government
campaigns in Ireland and the UK initially discouraged people from
travelling behind the two countries. This had a direct effect on the
sector. Transport companies and hotels/guesthouses were adversely
affected, in addition to indirect effects on pubs and restaurants and
key elements of the services sectors.
3.15
Secondly, overseas tourist numbers were reduced by the negative
publicity surrounding the outbreak of FMD in the United Kingdom.
The widespread negative publicity associated with the culling led to
the perception that the UK countryside was off limits and this
perception also damaged the Irish market. Even in the absence of the
actual restrictions on activities, it is reasonable to assume that
Ireland’s tourist interests would have suffered.
Indecon
February 2002
19
Section 3
Economic Effects
3.16
These effects are clearly negative. However, a number of the events
affected by the restrictions were postponed rather than cancelled. As
a consequence, the original cancellations do not necessarily represent
a permanent loss to the economy on the assumption that some level of
economic activity would be generated for the postponed event.
However the evidence suggests that postponed events failed to
generate the same level of activity, most notably in relation to the St
Patrick’s Day parade.
3.17
Apart from overseas tourism, the domestic tourist sector was also
affected. In addition, non-tourist-related economic activities were
affected due to the restrictions on movements and these would need
to be considered. These include, for example, the impact on
horseracing and greyhound racing.
3.18
Once again however, there may be offsetting effects. Domestic
consumers who reduce their expenditure on an affected activity, such
as visits to the countryside or attendance at a racing meeting, may
choose to spend their incomes on other consumption that would tend
to generate economic activity.
Table 3.4: Economic Effects for the Tourism Sector and Other
Sectors
1.
Direct income loss due to decline in overseas visitors
2.
Indirect income loss due to decline in overseas visitors
3.
Income effects for domestic tourism
4.
Other domestic effects
Source: Indecon
Exchequer Costs
3.19
Finally, there are a number of costs to the Exchequer that need to be
assessed. These include the actual costs of introducing the various
restrictions. Officials from the Department of Agriculture, Food, and
Rural Development, and other Departments and members of the
Gardaí and the Army were involved in these operations. These
include the ring fencing of the border, controls at ports and airports.
Indecon
February 2002
20
Section 3
Economic Effects
3.20
These efforts involved a considerable cost in terms of man-hours. Our
evaluation also estimates the costs of these various logistical
operations.
This includes the direct costs in terms of overtime
payments and also the cost of work forgone during the operations.
3.21
The Exchequer costs associated with the outbreak in Louth also need
to be considered. These include the cost of the restrictions imposed,
the cost of culling and disposal, and the costs of the compensation
provided to farmers in the affected areas. In response to the crisis
facing the tourism sector there was an also additional allocation made
to the budget for promoting Irish tourism. This is a further cost borne
by the Exchequer.
3.22
Finally, there is the cost to the Exchequer in terms of lost tax revenues
as economic activity slowed.
Table 3.5: Other Negative Effects
1.
Cost of Time Spent by Departmental Officials
2.
Cost of Gardaí and Army Time
3.
Cost of the Compensation Package Provided
4.
Cost of Culling and Disposal
5.
Cost of Additional Tourism Promotion
6.
Lost tax revenue
Source: Indecon
Review of International Research on Economic
Impacts of FMD
3.23
This sub-section provides a brief overview of some of the studies
undertaken in other countries in relation to the economic impact of
Foot and Mouth Disease. The vast majority of the recent international
literature in relation to such studies is from the UK. This summary
begins by considering the impact on regions within the UK, as well as
considering the UK as a whole. A study on the impact of FMD from
France is also detailed.
Indecon
February 2002
21
Section 3
Economic Effects
South-West of England
3.24
3.25
Two studies were commissioned to study the impact of FMD in the
South-West of England. The first, “Impacts of FMD in the South West
Region”, was commissioned by the Government of the South West
(GOSW) and its principal findings included the following:
-
Close to one-third of all businesses in the area reported being
adversely affected by FMD;
-
10 per cent of all businesses reporting a "severe" or "very
severe" impact;
-
The worst affected sectors were in the tourism, transport and
agricultural sectors;
-
Overall, up until the end of April 2001 close to £760m (or 3%)
in sales had been "lost" to SW businesses as a result of FMD;
-
Around 2,500 people are estimated to have lost their jobs as a
result of FMD;
-
14,000 full and part-time staff temporarily was laid off as a
result of FMD.
A second report, “The Economic Impact of Foot and Mouth Disease”,
conducted by the Plymouth Business School, estimated FMD would
imply a loss in the tourism sector of between 0.1 and 0.2 per cent of
regional GDP - equivalent to around £60 to £140 million. In Devon,
this figure rises to between 0.25 and 0.5 per cent of GDP or £38 - £75
million, as that county is more reliant on tourism than other areas of
the region.
East Midlands of England
3.26
A Report by the Government Office for the East Midlands, entitled
“The Economic Impact of Foot and Mouth Disease on the East
Midlands” looked at the regional impact of FMD in the area and
found that:
-
27% of businesses interviewed felt FMD had an impact on
their trading in some way in the 6-8 week period since the first
cases were reported in the region;
-
21% of the sample felt that the impact was adverse;
-
Businesses worst affected included those related to agriculture,
and those dependent on passing trade such as pubs, hotels and
restaurants in rural areas;
-
Businesses within urban areas were less affected.
Indecon
February 2002
22
Section 3
Economic Effects
Yorkshire - England
3.27
A study undertaken by the Yorkshire Tourist Board considered how
severely FMD had impacted on the Yorkshire tourist industry. The
following represent the main findings:
-
Rural tourism in Yorkshire fell by over £190million during
March 2001;
-
70% of respondents reported a decrease in enquiries for March
2001 compared to 2000;
-
81% of self-catering businesses reported a decrease in
enquiries, and 69% a decrease in turnover;
-
51% of respondents reported that visitor numbers from abroad
were down;
-
19% reported laying off staff as a direct result of foot and
mouth;
-
15% have temporarily closed.
South East of England
3.28
A study entitled “Economic Impact of FMD in the South East Region”
was undertaken by the Government Office for the South East in
England, and indicated the following:
-
28 % of businesses felt that FMD had an impact on their
business;
-
For the South-East region as a whole, the estimated reduction
in total revenues for April alone was St£1.2 billion; and,
-
3% of businesses indicated FMD-related staff changes.
Scotland
3.29
A report conducted for The Scottish Executive Central Research Unit
entitled “Foot and Mouth Disease Impact Tracking Survey” was
conducted over time, and focused on the economic impact of FMD on
non-agricultural businesses in Scotland.
Among the principal
findings of the report were:
-
A majority of businesses (66%) have felt no impact from FMD;
-
The impact of FMD has varied by sector, and tourism
businesses have been most widely affected;
-
A large majority of those unaffected in April still recorded no
impact by September;
Indecon
February 2002
23
Section 3
Economic Effects
-
In the September survey only 3% of all businesses attributed
any staff changes, compared to the same month in the
previous year, directly to FMD. This is somewhat lower than
5% of all businesses in both April and June;
-
Inevitably there are variations by sector, and the tourism sector
recorded the highest year-on-year changes attributable to FMD
in April, June and September (13%, 16% and 7% respectively);
-
The proportion of businesses recording year-on-year sales
losses dues to FMD has fallen steadily from a level of 16% in
April to 10% in June and 7% in September;
-
In line with June findings, only 3% of businesses recorded an
increase to their costs as a result of FMD in September
(compared with 9% in April);
-
The survey sought to identify any actions taken by businesses
suffering a negative impact from FMD and the data shows that
by September the most widespread actions had been to cancel
or postpone recruitment or capital investment, increase
marketing activity and to reduce prices to attract business;
-
In conclusion, a large majority of businesses (66%) felt that
their operations have been unaffected by FMD at any stage
since the outbreak began. By September, there has been a
slight decrease in both year-on-year staff changes and sales
losses attributable to FMD amongst those affected. However,
there had been increases in the proportions of affected
businesses finding it necessary to increase marketing activity,
cancel or postpone recruitment or capital investment or reduce
prices. Overall the shift was in a considerably more positive
than negative direction although of those still affected in
September, the tourism sector continued to feel by far the
greatest impact.
Centre for Economic and Business Research – UK Study
3.30
The Centre for Economic and Business Research in London estimated
that FMD could cost the UK St£9bn or close to 1 per cent of GDP.
Furthermore, estimates implied that St£6.4bn of this overall loss
would result from the effect on the tourist trade in the UK.
Subsequently however, the overall figure was revised down to just
over £6bn.
Indecon
February 2002
24
Section 3
Economic Effects
France - Institut National de la Researche Agronomique (INRA)
3.31
An evaluation of the potential economic impact of a foot and mouth
disease epidemic by the INRA was conducted between 1995 and 1997
at the request of the Ministry of Agriculture and Fisheries in France.
In each of the cases studied, it was concluded that a slaughtering
strategy of infected herds and of herds that may have been in contact
with the virus would be the best way of minimising economic losses.
It was estimated that strategies involving emergency vaccination
would result in an increase in the duration of any export ban. The
INRA state that research shows that ban duration would be the main
source of economic losses to the French economy if faced with a foot
and mouth epidemic, and estimated this at up to €56.4 million for each
week of an embargo.
Conclusion
3.32
The FMD outbreak in the UK in 2001 and the response in Ireland had
a number of effects. For the agricultural sectors these were both
negative and positive. For other sectors of the economy, particularly
the tourism sector, the effects are overwhelmingly negative. The
Review of the International Research shows that these effects were
identified in a number of Studies. In the next section the economic
impact of FMD on the agricultural sector.
Indecon
February 2002
25
Section 4
4
Estimated Economic Impact on Agricultural Sector
Estimated Economic Impact on Agricultural
Sector
Introduction
4.1
In the previous section the different economic effects of FMD were
identified and discussed. In this section, estimates of the economic
impact on the agricultural sector are presented.
Impact on Agricultural Sector
4.2
It is informative at the outset to examine the importance of the
agricultural sector to the Irish economy. Table 4.1 presents total
agriculture output as well as added value for the period 1999 to 2001.
The data show that over the period gross output increased by 5.5 %.
Gross output amounted to over €5.8 billion in 2001 while added value
in the agricultural sector is estimated to be over €3 billion. As a
percentage of GDP, the primary agriculture sector now represents
approximately 3.2%.
Table 4.1: Agriculture as a Percentage of GDP, 1999-2001 - €million
1999
2000
2001
% Change 1999 to 2001
Total Output
5,528.5
5,812.8
5,833.2
5.5%
Added Value at
basic prices
2,546.7
2,702.2
2,629.3
3.2%
407.6
424
645.1
Total
2,954.3
3126.2
3,274.4
GDP at Factor
Cost
78,941
91,309
103,030
3.7%
3.4%
3.2%
Plus Subsidies
less taxes
Agriculture as a
% of GDP
10.8%
Source: CSO
Indecon
February 2002
26
Section 4
Estimated Economic Impact on Agricultural Sector
4.3
In considering the agricultural sector, it is also necessary to take
account of the food-processing sector. The latest data on the food
sector are available from the 1999 Census of Industrial Production
published by the CSO. These data are presented in Table 4.2 and
indicate that value added in the food sector was estimated to be €2,932
million, representing 3.7% of GDP.
4.4
Accordingly, on the basis of these data the added value of the agrifood sector in Ireland represents almost 7.4% of national income.
These data are set out in Table 4.2.
Table 4.2: Contribution to GDP of Primary Agriculture and Food
Sector in 1999 - €million and as % of GDP
€million
% of GDP at
Factor Cost
Primary Agriculture
2,954.3
3.7%
Food
2,932.4
3.7%
Primary Agriculture and Food
5,886
7.4%
GDP at Factor Cost
78,941
Sector
Source: CSO, Census of Industrial Production
4.5
An alternative approach is to consider employment in the sector.
Table 4.3 shows that employment in the agriculture and food sector
combined totalled 168,000 in 2001. This represents a decline of over
18,000, or almost 15 %, between 1995 and 2000. The majority of this
decline is in primary agriculture, while employment in food
processing increased over this period.
Indecon
February 2002
27
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.3: Employment Trends in Agricultural and Food Sector
from 1995 to 2000 – Numbers in Employment (000s)
1995
1996
1997
1998
1999
2000
Percent
Change
95-00
Primary
Agriculture
143
138
134
126
126
122
-14.7
Food
Processing
43
37
45
45
46
46
7
Primary and
Food
186
175
179
171
172
168
-9.6
Total
Employment
1,248
1,297
1,338
1,427
1,515
1,588
27.2
Source: CSO
4.6
In terms of employment, the agri-food contribution is more important
to the economy than suggested by measures of added value. As a
proportion of total employment, the primary and food sectors
combined equal 10.6% of total employment in 2001. These data are
set out in Table 4.4.
Table 4.4: Employment Trends in Agricultural and Food Sector
from 1995 to 2000 – % of Total Employment
1995
1996
1997
1998
1999
2000
Primary
Agriculture
11.5%
10.6%
10.0%
8.8%
8.3%
7.7%
Food
Processing
3.4%
2.9%
3.4%
3.2%
3.0%
2.9%
Primary and
Food
14.9%
13.5%
13.4%
12.0%
11.4%
10.6%
Source: CSO
Indecon
February 2002
28
Section 4
4.7
Estimated Economic Impact on Agricultural Sector
Next we examine the composition of agricultural output as FMD
primarily affects the beef, pig, and sheep livestock sectors and some
dairy products. According to the data presented in Table 4.5, the
primary output of the livestock sector represents 46 % of the total
agriculture output in Ireland. Livestock products, namely milk, are
the next most significant sector accounting for 32 % of output. Finally,
crops represent the remaining 22 % of agricultural output.
Table 4.5: Primary Agricultural Output from 1999 to 2001
- €million and as % of Total Agriculture Output
1999
2000
2001
2,076
2,153.7
2,214.5
45.7%
45.9%
45.5%
1,340.2
1,372.4
1,303.1
Pigs
231.4
271.9
327.8
Sheep
200.3
205.2
281
1,439.1
1,482.2
1,578.1
31.7%
31.6%
32.4%
1,025.1
1,057.8
1,078.4
22.6%
22.5%
22.1%
Goods output at
producer prices
4,540.4
4,693.7
4,871
Total Output3
5,528.6
5812.8
5833.2
Total Livestock
Of which:
Cattle
Livestock Products
Crops
Source: CSO
3
This figure is obtained by adding contract work, subsidies on products and taxes on products to goods
output at producer prices.
Indecon
February 2002
29
Section 4
Estimated Economic Impact on Agricultural Sector
Recent Trends in Livestock Sectors
4.8
In the previous chapter a number of potential economic effects were
identified for the agriculture sector arising from the outbreak of FMD
in the UK and the restrictions introduced in Ireland. These effects, in
the first instance, would affect earnings of the livestock sectors (beef,
pig and sheep), in addition to some dairy sectors.
4.9
The available data suggest that livestock farmers had a reasonable
year in 2001. In total, livestock sales increased by 2.8 % in 2001
compared to 2000. This is a lower increase than the 3.7 % in 2000, but
still represents an increase notwithstanding the difficulties caused by
both the on-going BSE scare and FMD.
Table 4.6: Trends in the Value of Livestock Sector
1999/2000
2000/2001
3.7%
2.8%
Cattle
2.4%
-5.0%
Pigs
17.5%
20.6%
Sheep
2.5%
36.9%
Livestock Products
3.0%
6.5%
Crops
3.2%
1.9%
Total Livestock
Of which:
Source: CSO
4.10
The data indicates significant variations across sectors however. The
total value of cattle sales declined by 5 % in 2001 compared to 2000. In
contrast, for the second year in a row the sales of pigs in value terms
increased significantly. In 2001 there was an increase of 20.6 %
compared with an increase of 17.5 % in 2000. Positive trends are also
revealed for the sheep sector with an increase in value of 36.9%. This
compares with an increase of 2.5 % in 2000. Livestock products also
showed an increase.
Indecon
February 2002
30
Section 4
4.11
Estimated Economic Impact on Agricultural Sector
In summary, the total value of pig and sheep sales increased
significantly in 2001 while there were declines in the beef sector. The
lower value of cattle sales is attributable to the on-going difficulties
caused by the BSE crisis of Autumn 2000, which continued into 2001.
Overall, there were modest gains in the livestock sector of 2.8 % for
the year as a whole.
Price and Volume Trends
4.12
Table 4.7 shows these trends disaggregated into changes in price and
volume. The price of all livestock increased by 1.3 % in 2001, implying
an increase in volumes of 1.5 %. Once again, there are significant
variations across sectors. It is estimated that the price of cattle fell by
6.8 % in 2001 while there was an actual increase in output of 1.8 %,
according to the available data.
4.13
A more positive picture emerges from the other two sectors. It is
estimated that pig prices increased by 16.8% in 2001 while the price of
sheep increased by 42.8 %. This implies an increase in pig volumes of
3.8 % and a decline in the volume of sheep of 5.9 %.
Table 4.7: Trends in Prices and Volumes – 2001 to 2000
Price Changes
Volume Changes
1.3%
1.5%
Cattle
-6.8%
1.8%
Pigs
16.8%
3.8%
Sheep
42.8%
-5.9%
4.3%
2.2%
Total Livestock
Of which:
Livestock Products
Source: CSO
Indecon
February 2002
31
Section 4
4.14
Estimated Economic Impact on Agricultural Sector
These trends are to a large extent determined by developments in
Ireland’s export markets given Ireland’s position as a leading livestock
exporter. In the most important sector, beef, 90 % of production is
exported. For sheep the proportion is lower at 65 %, while 60 % of pig
output is exported. These data are included in Table 4.8 along with a
breakdown of exports by market4.
Of total beef exports, over a
quarter were destined for the UK while 43 % went to other EU
markets. Interestingly, non-EU countries accounted for 31 % of total
beef exports, much of which was affected by the BSE-related export
ban.
Table 4.8: Selected Exports by Market – 1999
Product
Share of
Production
Exported
Market Share
UK
Other EU
Non-EU
Beef
90%
26%
43%
31%
Sheep
65%
5%
95%
0%
Pig
60%
54%
21%
25%
Source: CSO
4.15
For the sheep sector the structure of the market is somewhat different.
Only 5 % of exports went to the UK in 1999 reflecting the fact that the
UK is the largest producer of sheep in the EU while there were no
exports to non-EU markets. Accordingly, 95 % of all sheep exports
were destined for the non-UK European market.
4.16
The data for the pig sector suggest that it is less export-orientated that
the sheep sector. According to these data, the UK market accounts for
54 % of exports. Broadly similar proportions are accounted for by
other EU markets (21 %), and non-EU markets (25 %).
4.17
Dairy products can also be affected by FMD-related export bans. The
data for these products are therefore set out below in Table 4.9. For
some products, non-EU countries are extremely important markets.
4
Data for 1999 that pre-date the most recent BSE scare are used.
Indecon
February 2002
32
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.9: Selected Dairy Exports by Market – 1999
Product
Value (£m)
1999
Market Share
UK
Other EU
Non-EU
Butter
285
23%
71%
6%
Cheese
215
75%
19%
6%
SMP
122
15%
38%
47%
Other Dairy
174
28%
31%
41%
Source: CSO
4.18
In summary, the available data suggest that the livestock sectors had a
good year in 2001 with strong growth in the pig and sheep sectors
offset somewhat by the BSE-related difficulties in the beef sector. On
the basis of this analysis, it appears that the FMD outbreak did not
have a significant impact on incomes in the pig and sheep sectors.
4.19
However, this aggregated analysis does not enable us to fully isolate
the economic effects of FMD. Key agricultural sectors would be
affected by overall sectoral trends in addition to the impact of BSE and
FMD. Therefore, it is necessary to isolate these effects and this
requires a more disaggregated analysis. This analysis is undertaken in
the following sections where sectoral trends for 2001 are examined.
Pig Sector
4.20
The analysis set out above indicates that total sales in the pig sector
increased in 2001. In assessing the potential impact of FMD on the
sector, it is useful to examine trends in the volume of slaughtering and
prices during the course of the year.
4.21
In unit terms the percentage year-on-year changes in slaughtering are
shown in Table 4.10. The data indicate that the foot and mouth
restrictions on the movement of animals, the closure of markets, and
the limited export bans did not lead to a dramatic decrease in the level
of slaughtering during the key months of February, March and April
from the corresponding months in 2000. In fact there were year–onyear increases during March and April.
Indecon
February 2002
33
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.10: Slaughtering of Pigs 1999-2001 - Units (000s)
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
Total
1999
Unit
296.1
295.8
319.2
292.8
272.8
280.8
291.7
287.9
288.7
283.7
320.7
257.4
3488
2000
Unit
292.6
276.8
272.8
243.1
277.5
247.3
252.2
281.6
251.2
254.4
281
213.9
3144
-1.2
-6.4
-14.5
-17.0
1.7
-11.9
-13.5
-2.2
-13.0
-10.3
-12.4
-16.9
-9.8
Unit
254.1
249.6
296.9
260
259.7
290.5
263.8
274.6
301.6
290.8
275.5
% Chg
-13.2
-9.8
8.8
7.0
-6.4
17.5
4.6
-2.5
20
14
-2
% Chg
2001
Source: CSO
4.22
Comparable data on the tonnes of pigs slaughtered show a similar
picture, and these data are included in Table 4.11. The trends in
slaughtering by carcass weight are consistent with the trends in Table
4.10.
Table 4.11: Slaughtering of Pigs 1999-2001 – By Carcass Weight (000 tonnes)
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
Total
1999
Weight
21.6
21.2
23
20.5
19.1
20.1
21
20.7
20.6
20.5
23.2
18.2
249.7
2000
Weight
21.2
20.1
19.5
17.5
20
17.7
17.9
20.2
18.1
18.4
20.5
15.3
226.4
% Chg
-1.9
-5.2
-15.2
-14.6
4.7
-11.9
-14.8
-2.4
-12.1
-10.2
-11.6
-15.9
-9.3
Weight
18.6
18.4
21.7
18.9
18.9
21
19.0
19.9
22.1
21.3
20.0
% Chg
-12.3
-8.5
11.3
8.0
-5.5
18.6
6.1
-1.5
18.1
15.8
-2.4
2001
Source: CSO
4.23
A detailed examination of the export data is required to adequately
explain trends in the sector. Accordingly, data on exports by type
and by market were accessed as part of this Study. There are two
categories, namely “Meat and Meat Preparations” and “Live
Animals”, as defined by the CSO’s SITC Codes. First we focus on the
more important “Meat and Meat Preparations” category, and consider
“Live Animals” exports subsequently.
Indecon
February 2002
34
Section 4
4.24
Estimated Economic Impact on Agricultural Sector
Data on the export of pig meat for the first three quarters of 2001
compared with 2000 are shown in Table 4.12. Over this period, total
exports of pig meat and pig meat preparations were over €150 million.
The data in Table 4.12 show that exports to non-EU markets fell
during the year by 54.2 % mainly due to the FMD-related export ban.
This is important as 25 % of total exports go to non-EU countries.
Table 4.12: Percentage Change in the Value of Pig Meat Exports
per Market for 2001
UK
EU
Non-EU
Total
January
22.5%
33.7%
83.5%
41.0%
February
21.9%
31.1%
37.2%
28.6%
March
34.9%
-7.0%
-51.4%
1.3%
April
58.4%
136.2%
-98.4%
37.7%
May
19.2%
101.5%
-94.8%
18.9%
June
-1.9%
108.5%
-98.7%
8.5%
July
51.4%
132.2%
-91.0%
29.9%
August
31.0%
102.5%
-77.4%
24.3%
September
18.4%
95.1%
-79.2%
22.4%
Total: Jan-Sep
27.2%
79.2%
-54.2%
22.2%
Source: Unpublished CSO data
4.25
4.26
Offsetting these trends is an increase in the value of pig-meat exported
to the UK of 27.2 %. Furthermore, Irish exporters increased their
exports to other European Union markets by almost 80 % over the
same period. These higher exports to the EU reflect:
•
Lower UK exports;
•
Higher demand as the consumption of beef has fallen across
Europe; and,
•
Higher export prices.
The same data in value terms are shown in Table 4.13. Overall, this
suggests that the value of Irish pig meat exports increased by €28
million in the first nine months of 2001. This increase comprised of
increases of exports valued at €15 million to the UK and €30 million to
the EU, and a decrease of €17 million to non-EU markets.
Indecon
February 2002
35
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.13: Change in the Value of Pig Meat Exports per Market
for 2001 – in € (000s)
UK
EU
Non-EU
Total
January
1,359
876
2,574
4,809
February
1,298
1,107
1,310
3,715
March
2,655
-419
-2,015
221
April
2,696
5,045
-3,326
4,415
May
1,219
4,776
-3,255
2,740
June
-129
4,847
-3,462
1,256
July
2,947
4,537
-3,570
3,914
August
1,955
4,775
-3,093
3,637
September
1,160
4,232
-2,327
3,065
Total: Jan-Sep
15,160
29,776
-17,164
27,772
Source: Unpublished CSO data
4.27
Next we consider live pig exports. Table 4.14 shows the percentage
change in the value of live pig exports per market between the first
nine months of 2000 and 2001. Overall, the value of live pig exports
fell by 62.6%. It should be noted here that 99% of live pig exports
were to the UK in 2000.
Indecon
February 2002
36
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.14: Percentage Change in the Value of Live Pig Exports per
Market for 2001
UK
EU
Non-EU
Total
January
154.3%
-
-
154.3%
February
53.1%
-
-
53.1%
March
-92.4%
-
-
-92.6%
April
-100.0%
-
-
-100.0%
May
-100.0%
-
-
-99.9%
June
-85.1%
-
-
-85.1%
July
-69.5%
-
-
-69.5%
August
-72.9%
-
-
-72.9%
September
-88.1%
-
-
-88.1%
Total: Jan-Sep
-62.3%
-
-
-62.6%
Source: Unpublished CSO data
4.28
Comparable data in value terms are presented in Table 4.15. In total,
the decline in the value of live pig exports for the first 9 months of
2001 equalled €16 million. Given that pig meat exports increased by
€28 million, the pig sector experienced growth in exports of €12
million in total over the first nine months of 2001 compared to the
corresponding period in 2000.
Indecon
February 2002
37
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.15: Change in the Value of Live Pig Exports per Market for
2001 – in € (000s)
UK
EU
Non-EU
Total
January
2,172
-
-
2,172
February
1,090
-
-
1,090
March
-2,839
-
-
-2,922
April
-2,704
-
-
-2,714
May
-3,064
-
-
-3,126
June
-3,209
-
-
-3,209
July
-2,011
-
-
-2,011
August
-2,288
-
-
-2,289
September
-3,171
-
-
-3,171
Total: Jan-Sep
-16,024
-
-
-16,180
Source: Unpublished CSO data
4.29
As highlighted, some of the increase in export values is due to the rise
in prices caused in part by the reduction in UK output. Table 4.16
shows the year-on-year trend in pig prices from January 2001 to
September 2001. The data indicate a significant year-on-year recovery
in prices that commenced before the outbreak of FMD and continued
throughout the year albeit at a lower rate of increase.
Indecon
February 2002
38
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.16: Year-on-Year Changes in the Price of Pigs –
2001/2000 – in €
2000
2001
% Change
January
69.5
91.6
31.8%
February
70.9
96.9
36.7%
March
76.6
107.2
39.9%
April
82.7
98.8
19.5%
May
85.5
103.2
20.7%
June
90.2
104.4
15.7%
July
89.5
101.1
13.0%
86
96.3
12.0%
86.3
91.6
6.1%
August
September
Source: CSO
4.30
In summary, this detailed analysis suggests that the pig sector in
Ireland benefited marginally from the FMD outbreak. Total pig
exports for the first three quarters of the year were higher by €12
million with export losses to non-EU markets offset by higher UK and
EU exports. However, it is clear that not all of the higher export
values are due to FMD effects, but it is our judgment that about 75 %
of the increase can be attributed to FMD consequences. This is
equivalent to about €9 million for the first three quarters of the year.
Sheep Sector
4.31
As discussed earlier, total sales in the sheep sector also rose last year.
Once again, to assess the potential impact of FMD, market trends in
this sector are examined in detail.
4.32
The percentage year-on-year changes in the number of sheep
slaughtered are shown in Table 4.17. In contrast with the data on pig
slaughtering, the data indicate that the year on year changes fluctuate
month to month and based on this data there is no discernible trend in
the level of slaughtering during the FMD affected months.
Indecon
February 2002
39
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.17: Slaughtering of Sheep 1999-2001 - Units (000s)
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
Total
1999
Unit
264.8
224.9
289.9
347.5
407.6
505.2
457.6
436.6
420.9
422.1
368.7
377.6
4523
2000
Unit
258.9
214.8
203.5
252.6
466.8
487.1
444.6
426.1
345.2
336.0
380.6
300.4
4117
-2.2
-4.5
-29.8
-27.3
14.5
-3.6
-2.8
-2.4
-18.0
-20.4
3.2
-20.4
-9.0
258.6
238.5
157.1
273.8
411.3
346.8
399.8
455.8
388.0
409.4
345.7
-0.1
11.0
-22.9
8.4
-11.9
-28.9
-11.2
7.0
12.4
21.8
-9.2
% Chg
2001
Unit
% Chg
Source: CSO
4.33
Comparable data on the tonnes of sheep slaughtered show a similar
picture. These data are presented in Table 4.18 and indicate a fall in
volumes in March, May, June, July, and November. These falls are
primarily due to a reduction in the national flock as indicated in the
December 2000 Census.
Table 4.18: Slaughtering of Sheep 1999-2001 – By Carcass Weight (000 tonnes)
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
Total
1999
Weight
5.3
4.5
5.8
7.0
8.1
9.9
9.0
8.8
8.5
8.5
7.4
7.5
90.3
2000
Weight
5.2
4.4
4.2
5.1
9.3
9.6
8.9
8.6
7.0
6.9
7.7
6.0
82.9
% Chg
-1.9
-2.2
-27.6
-27.1
14.8
-3.0
-1.1
-2.3
-17.6
-18.8
4.1
-20.0
-8.2
Weight
5.2
4.8
3.1
5.5
8.2
6.9
7.9
9.1
7.8
8.2
6.9
% Chg
0.0
9.1
-26.2
7.8
-11.8
-28.1
-11.2
5.8
11.4
18.8
-10.4
2001
Source: CSO
4.34
In understanding these trends it is again useful to examine sheep meat
export data and these are set out in Table 4.19. Given that there are no
exports to non-EU markets, the majority of gains are on the upside
with exports to the UK up significantly, by 60.3 %. Exports to the rest
of the European Union are also higher (by 43 %), reflecting the fall in
UK output and higher prices.
Indecon
February 2002
40
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.19: Percentage Change in the Value of Sheep Meat Exports
per Market for 2001
UK
EU
Non-EU
Total
January
168.2%
-1.1%
-
6.5%
February
156.9%
16.3%
-
22.6%
March
179.1%
-11.4%
-
1.2%
April
129.1%
75.9%
-
78.1%
May
10.5%
61.8%
-
59.2%
June
70.3%
0.5%
-
4.1%
July
-22.2%
43.2%
-
38.7%
August
18.5%
77.5%
-
74.3%
September
30.8%
114.8%
-
109.4%
Total: Jan-Sep
60.3%
43.0%
-
44.2%
Source: Unpublished CSO data
4.35
Corresponding value data are shown in Table 4.20 below. In total,
sheep meat exports increased by €55.5 million in the first 9 months of
2001, over the corresponding period in 2000. Exports to the UK
increased by €4 million, while exports to the EU increased by €51
million.
Indecon
February 2002
41
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.20: Change in the Value of Sheep Meat Exports per Market
for 2001 – € (000s)
UK
EU
Non-EU
Total
January
767
-103
-
669
February
783
1,721
-
2,502
March
1,098
-982
-
107
April
568
8,029
-
8,605
May
104
11,038
-
11,178
June
756
93
-
857
July
-257
6,398
-
6,177
August
174
11,454
-
11,684
September
284
13,371
-
13,753
4,277
51,019
-
55,532
Total: Jan-Sep
Source: Unpublished CSO data
4.36
The changes in live sheep exports are considered next. In contrast to
sheep meat, the data here shows an overall decrease in exports to all
markets of 66.6%. Exports to the UK fell by 68.7% and to the EU by
17.2%. Interestingly, while there were proportionate increases in
January and February, exports fell significantly in each of the
following months to September.
Indecon
February 2002
42
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.21: Percentage Change in the Value of Live Sheep Exports
per Market for 2001
UK
EU
Non-EU
Total
January
54.2%
30.3%
-
52.4%
February
34.8%
-
-
59.0%
March
-80.4%
-100.0%
-
-81.5%
April
-100.0%
-
-
-100.0%
May
-94.5%
-
-
-94.5%
June
-99.6%
-100.0%
-
-99.6%
July
-100.0%
-100.0%
-
-100.0%
August
-82.4%
-100.0%
-
-85.1%
September
-96.5%
-100.0%
-
-96.8%
Total: Jan-Sep
-68.7%
-17.2%
-
-66.6%
Source: Unpublished CSO data
4.37
Table 4.22 presents the change in the value of live sheep exports per
market for 2001. In total, exports of live sheep fell by €8 million. This
implies that the value of total Irish exports in the sheep sector
increased by €47.5 million, given that sheep meat exports increased by
€55.5 million.
Indecon
February 2002
43
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.22: Change in the Value of Live Sheep Exports per Market
for 2001 – € (000s)
UK
EU
Non-EU
Total
January
508
20
-
527
February
445
310
-
755
March
-717
-54
-
-771
April
-1,005
0
-
-1,005
May
-1,540
0
-
-1,540
June
-2,383
-13
-
-2,396
July
-1,434
-89
-
-1,523
-594
-132
-
-726
September
-1,208
-124
-
-1,332
Total: Jan-Sep
-7,928
-82
-
-8,011
August
Source: Unpublished CSO data
4.38
The increase in export value to the EU is in part due to the export ban
on UK exports and reduced competition on the French market that led
to an increase in prices. Table 4.23 shows the year-on-year trend in
sheep prices from January 2001 to September 2001. The data indicate
significant year-on-year increases. Interestingly, there were price
increases prior to the FMD outbreak in January indicating there are
other relevant factors at work.
Indecon
February 2002
44
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.23: Year-on-Year Changes in the Price of Sheep - 2001/2000
2000
2001
% Change
January
82.8
109.2
31.9%
February
101
123.7
22.5%
March
106.3
140.2
31.9%
April
104.1
133.6
28.3%
May
91.6
142.1
55.1%
June
86.6
128.5
48.4%
July
80
122.2
52.8%
August
80.7
117
45.0%
September
81.9
123.1
50.3%
Source: CSO
4.39
In summary, total exports in value terms increased primarily due to
higher prices and, to a lesser extent, higher exports to the UK. These
factors combined led to an increase in export values of around €47.5
million for the first three quarters of the year.
4.40
It is clear that part of the higher export values is due to higher prices
that are not exclusively related to FMD. If it is assumed that 50 % of
these gains are attributable to FMD, this implies an FMD-related
increase to the sheep sector of €23.75 million.
Beef Sector
4.41
In this section we examine the impact on the beef sector, where the
analysis is complicated by the on-going effects of the BSE scare of
Autumn 2000. This led to a significant decline in beef consumption in
the EU of upwards of 30 %. This also led to the imposition of a ban on
EU exports (including Irish exports) to third countries. In view of
these developments there are no direct negative effects on exports to
these markets arising from FMD, as the markets were already closed
to Irish beef.
Indecon
February 2002
45
Section 4
Estimated Economic Impact on Agricultural Sector
4.42
These developments resulted in a substantial surplus of beef across
the EU and led to a considerable reduction in cattle prices. In order to
remove this surplus and stabilise the market, the EU introduced more
flexible intervention arrangements and a new market support that
became known as the “Purchase for Destruction Scheme (PFD)” which
was co-financed by the EU and national exchequers. The Purchase for
Destruction Scheme was replaced from 1 July 2001 by a new scheme,
the Special Purchase Scheme (SPS). Steers were eligible for the PFD,
which provided an effective support in the first 6 months of the year.
Steers were not eligible for the SPS and prices for these cattle were
supported primarily by the commercial market in the second half of
2001.
4.43
Trends in the level of slaughtering are included in Table 4.24 and
show very significant falls in the first half of 2001. This however
primarily reflects the effects of BSE and the lower level of stocks.
Table 4.24: Slaughtering of Cattle 1999-2001 - Units (000s)
Jan
Fev
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
Total
1999
Unit
189.8
179.9
198.5
165.4
153.2
151.1
147.8
171.8
199.9
203.1
213.7
158.7
2133
2000
Unit
119
193.5
205.7
166.8
163.3
139.6
117.3
160.8
180
184.3
171.9
83.5
1886
% Chg
-37.3
7.6
3.6
0.8
6.6
-7.6
-20.6
-6.4
-10.0
-9.3
-19.6
-47.4
-11.6
Unit
134.2
154.7
169.4
139.9
144
148.3
137.2
167.0
159.6
189.3
213.6
% Chg
12.8
-20.1
-17.6
-16.1
-11.8
6.2
17.0
3.9
-11.3
2.7
24.3
2001
Source: CSO
4.44
A comparable assessment is presented by the same data expressed in
terms of weight, as per Table 4.25. The trends in carcass weight
mirror those in Table 4.24.
Indecon
February 2002
46
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.25: Slaughtering of Cattle 1999-2001 – By Carcass Weight (000 tonnes)
Jan
Feb
Mar
Apr
May
Jun
July
Aug
Sep
Oct
Nov
Dec
Total
1999
Weight
58.5
54.5
58.4
49
45.8
45.2
44.5
52.3
61
61
64.8
48.2
643.8
2000
Weight
35.2
59
61.7
50.3
49.3
42.2
35.6
50.1
56.8
57.6
53.5
25.6
576.9
% Chg
-39.8
8.3
5.7
2.7
7.6
-6.6
-20.0
-4.2
-6.9
-5.6
-17.4
-46.9
-10.4
Weigh
41.9
47.2
50.8
42.3
43.7
46.6
42.4
51.1
49.5
57.9
65.3
% Chg
19.0
-20.0
-17.7
-15.9
-11.4
10.4
19.1
2.0
-12.9
0.5
22.1
2001
Source: CSO
4.45
These trends can be best explained by external market developments.
Table 4.26 shows a substantial reduction in exports to EU and non-EU
destinations. However, exports to the UK increased by almost 25 %
indicating that total beef exports fell by 37.7% in the first nine months
of 2001.
Table 4.26: Percentage Change in the Value of Beef Exports per
Market for 2001
UK
EU
Non-EU
Total
January
73.7%
-21.1%
20.8%
14.9%
February
0.2%
-56.1%
-95.4%
-54.0%
March
24.7%
-59.6%
-89.3%
-42.2%
April
4.4%
-56.1%
-99.3%
-51.7%
May
11.5%
-51.8%
-98.8%
-48.7%
June
43.4%
-51.1%
-92.4%
-32.3%
July
45.5%
-52.9%
-79.2%
-39.5%
August
32.2%
-52.1%
-49.4%
-28.5%
September
20.7%
-50.8%
-39.7%
-27.4%
Total: Jan-Sep
24.6%
-51.8%
-78.7%
-37.7%
Source: Unpublished CSO data
Indecon
February 2002
47
Section 4
4.46
Estimated Economic Impact on Agricultural Sector
In Table 4.27 we present data on the change in the value of beef
exports per market. The value of higher exports to the UK for this
period is almost €50 million. However, for other markets considerable
falls are recorded, and in total there was a decline in beef exports of
€268 million in the first nine months of 2001.
Table 4.27: Change in the Value of Beef Exports per Market for
2001 (Euros - 000s)
UK
EU
Non-EU
Total
January
8,427
-4,192
1,480
5,715
February
40
-19,195
-26,975
-46,130
March
6,663
-24,479
-20,692
-38,508
April
1,105
-19,939
-26,455
-45,289
May
2,523
-19,780
-23,694
-40,951
June
9,380
-22,121
-12,706
-25,447
July
7,607
-18,473
-19,074
-29,940
August
6,587
-21,505
-6,340
-21,258
September
5,771
-23,280
-8,855
-26,364
Total: Jan-Sep
48,103
-172,964
-143,311
-268,172
Source: Unpublished CSO data
4.47
Table 4.28 presents the percentage change in the value of live cattle
exports per market for 2001. While exports to the UK increased by 10
%, live cattle exports from Ireland fell by 83 % in total.
Indecon
February 2002
48
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.28: Percentage Change in the Value of Live Cattle Exports
per Market for 2001
UK
EU
Non-EU
Total
January
0.8%
-92.1%
-100.0%
-87.9%
February
-11.3%
-94.5%
-100.0%
-85.3%
March
-100.0%
-100.0%
-100.0%
-100.0%
April
205.4%
-100.0%
-100.0%
-76.6%
May
-100.0%
-99.9%
-100.0%
-99.9%
June
-55.7%
-99.5%
-61.5%
-90.8%
July
54.8%
-88.4%
-78.8%
-63.4%
August
24.0%
-81.1%
-63.3%
-59.4%
September
-23.1%
-77.2%
-87.6%
-76.8%
9.9%
-93.2%
-89.6%
-83.0%
Total: Jan-Sep
Source: Unpublished CSO data
4.48
Table 4.29 presents the change in the value of live cattle exports per
market for 2001. Overall the decrease amounted to €96 million,
implying total losses to the beef sector of €364 million in the first nine
months of 2001. It should be remembered however that this is a result
of both BSE and FMD.
Indecon
February 2002
49
Section 4
Estimated Economic Impact on Agricultural Sector
Table 4.29: Change in the Value of Live Cattle Exports per Market
for 2001 (000s)
UK
EU
Non-EU
Total
January
6
-6,087
-2,891
-8,972
February
-195
-8,646
-3,023
-11,864
March
-1,087
-12,408
-2,672
-16,167
April
2,218
-10,143
-2,880
-10,805
May
-731
-10,212
-3,593
-14,536
June
-345
-8,031
-1,010
-9,386
July
801
-4,619
-2,169
-5,987
August
564
-6,914
-1,754
-8,104
September
-181
-7,156
-3,151
-10,488
Total: Jan-Sep
1,050
-74,216
-23,143
-96,309
Source: Unpublished CSO data
4.49
5
The increase in exports to the UK market is also reflected in the earlier
slaughter of steers to meet the UK requirement for under 30 month
cattle and a reduction in sales of beef into the Purchase for Destruction
Scheme (PFD)5. Due to higher UK exports, the amount of beef sold
into the SPS fell during the year, thus reducing the costs to the
Exchequer of this scheme. Trends in the SPS are presented in the
chart below.
Additional data relating to beef prices and the SPS are presented in Annex 1.
Indecon
February 2002
50
Section 4
Estimated Economic Impact on Agricultural Sector
25000
2
20000
1.5
15000
1
10000
0.5
5000
Percent
Level
Trend in Special Purchase Scheme
0
0
-0.5
0
5
10
15
20
25
30
Week
Total
4.50
Monthly Change
Data on the changes in cattle prices on a monthly basis are presented
in Table 4.30. The figures show a steady decline in prices during the
year.
Table 4.30: Year-on-Year Changes in the Price of Total Cattle- 2001/2000
2000
2001
% Change
January
78.3
87.5
11.7%
February
81.8
82.6
1.0%
March
85
84.4
-0.7%
April
87.5
85.3
-2.5%
May
92
83.7
-9.0%
June
94.4
84
-11.0%
July
93
80.8
-13.1%
August
93.1
77.9
-16.3%
September
91.5
78.5
-14.2%
October
90.6
November
85.6
December
81.3
Source: CSO
Indecon
February 2002
51
Section 4
Estimated Economic Impact on Agricultural Sector
4.51
In conclusion, the beef sector suffered another difficult year in 2001.
Exports to the EU and non-EU countries fell due to the on-going
effects of BSE. However the FMD situation in the UK provided a
minor boost to the sector. Exports to the UK increased by €50 million
and prices were also firmer than expected due to the reduction in UK
supply. In addition, higher UK exports reduced the Exchequer cost of
the PFD.
4.52
As with the pig and sheep sectors, it could be argued that the beef
sector indirectly benefited from the FMD outbreak in the UK. It is
estimated these benefits are in the region of €30 million for the Irish
economy.
Second-round Effects
4.53
Higher exports values would lead to higher farms incomes and
increased activity in related sector. It is therefore necessary to
consider these second-hand round effects for other sectors.
4.54
These can be estimated using a so-called multiplier. The multiplier
tells us how much overall income/output changes when there is a
shift/change in autonomous spending. Defining the marginal
propensity to consume (MPC) as the proportion of additional income
that households consume, and the marginal propensity to import
(MPM) as the proportion of additional income that households spend
on extra imported goods, then the formula for the multiplier is equal
to:
1
(1 − MPC ) + MPM
4.55
If, for example, we assume that the MPC equals 0.7, and the MPM
equals 0.2, then this would imply a multiplier of 2. This means that
any change in autonomous spending will result in a 2 times change in
the overall equilibrium level of income. For example, a €100 increase
in autonomous spending would result in a 100 x 2 = €200 increase in
the equilibrium level of income.
4.56
For the purposes of this exercise however, we assume that the value of
the multiplier is 1.7, which is consistent with estimates reported in the
economic literature for Ireland6. Using this factor adds a further €44
million to these estimates.
6
For example, see United Nations Economic and Social Council, Commission on Sustainable Development,
Indecon
February 2002
52
Section 4
Estimated Economic Impact on Agricultural Sector
Conclusions
4.57
It is extremely difficult to isolate the effects of FMD on the agriculture
sector. There are a number of effects including:
•
A ban on exports to non-EU countries;
•
Higher exports to the UK;
•
Higher prices due to lower UK output.
4.58
On balance, it is felt that Irish agriculture actually benefited
marginally due to the FMD-related reduction in UK output. It is
estimated that export values were higher by about €63 million. Given
second effects, the best indicative estimate is that there were
agriculture-related benefits from FMD of around €107 million. These
are summarised in Table 4.31.
4.59
In addition, there are some further costs due to the closure of Marts
and the restrictions on animal movements. These costs, which are
difficult to quantify, would tend to reduce these estimated benefits.
However, these benefits relate only to the period up to end-September
2001. As the supply of livestock in the UK is unlikely to reach preFMD levels for some time, the benefits to the agricultural sector in
Ireland are likely to extend beyond this period while costs-related to
the closure of some third-country markets will also extend beyond
September.
Table 4.31: Summary of Main Impacts of FMD on the Agriculture
Sectors in Ireland
Estimated Losses/Gains
•
Pig
•
Sheep
•
Beef
•
First Round Total
•
Second Round Impacts
•
Total
€ Million
9
23.7
30
62.7
44
106.8
Source: Indecon analysis
Seventh Session, 19-30 April, 1999.
Indecon
February 2002
53
Section 5
5
Estimated Economic Impact on Tourism Sector
Estimated Economic Impact on Tourism
Sector
Introduction
5.1
In chapter 3 the main effects of FMD on the tourism sector were
identified. This highlighted the fact that a number of sporting,
business, and cultural events were cancelled or postponed, resulting
in a reduction in the number of overseas visitors to Ireland. In
addition, tourism numbers were adversely affected by the negative
publicity associated with the outbreak of FMD in the UK.
5.2
In general terms, the economic effects of FMD for the tourism sector
include the following:
5.3
-
Direct income loss due to the decline in overseas visitors;
-
Indirect income loss due to the decline in overseas visitors;
-
Income effects arising from changes in domestic tourism
patterns;
-
Other domestic effects.
This section analyses and quantifies the impacts of FMD on the
tourism sector in Ireland.
Recent Trends
5.4
Tourism is an important sector in Ireland. According to data for 2000,
total expenditure by overseas tourists to Ireland is estimated to be in
the region of €3.7 billion. This represents over 5 % of GDP in 2000.
5.5
In summary, the economic benefits of the Irish tourist industry are as
follows7:
7
-
As of 2000, out-of-State tourist expenditure (including
spending by visitors from Northern Ireland) was estimated
as €2.9 billion;
-
Fares paid to Irish carriers amounted to a further €0.8
billion;
-
Domestic tourism was estimated to be €1.1 billion;
Bord Failte, Tourism Facts 2000.
Indecon
February 2002
54
Section 5
5.6
Estimated Economic Impact on Tourism Sector
-
Estimates of central government taxation receipts from
tourism expenditure are €2.0 billion, with €1.6 billion
coming from overseas tourists;
-
In terms of employment, the tourism sector employed an
estimated 145,000 persons in 2000, representing 8.7% of
total employment in the Republic of Ireland.
It is estimated that over 6.3 million overseas visits were made to
Ireland in 2000, compared to just over 6 million in 1999. This
represents an increase of 5.8 %. In addition, the data indicate that:
-
The number of overseas visits from North America in 2000
was just over 1 million, an increase of 11.3 % on the
previous year;
-
Overseas visits on air cross-Channel routes increased by
7.4 % from 1999;
-
There were 357,000 same-day overseas visitors to Ireland in
2000, and;
-
The average length of stay during 2000 was 7.7 nights.
5.7
Analysis of the aggregate data for the first six months of 20018 indicate
that Irish tourism was adversely affected by the FMD scare. 1.8
million overseas visitors came to Ireland between April and June of
2000. However, for the same period in 2001 there was a decline of 6.8
% to 1.6 million overseas visitors between April and June of 2001.
5.8
Furthermore, there was a 10 % decline in the number of overseas
visitors on cross-Channel routes, with the largest decline for sea
routes. Reflecting these trends, the total number of bed-nights fell by
almost 900,000 in the second quarter of 2001 from the corresponding
period in 2000. This includes a decline of 210,000 bed-nights in hotels.
5.9
A number of sub-sectors and groups were directly or indirectly
affected by the FMD crisis. Amongst those affected are:
8
-
Air and sea carriers;
-
Hotels and guesthouses;
-
Pubs and restaurants;
-
Bus and coach travel;
-
Taxis; and,
-
Heritage centres;
This analysis was completed prior to the publication of the CSO third quarter data for tourism.
Indecon
February 2002
55
Section 5
Estimated Economic Impact on Tourism Sector
5.10
As discussed earlier, one of the direct effects of FMD was to result in
the cancellation or postponement of a number of events, including
conferences and conventions. Discussions with industry sources
indicate that it was mainly domestic conferences and meetings that
were cancelled. However, the numbers attending were down, and in
particular, the number of delegates from Britain. Other overseas
corporate meetings were not badly affected.
5.11
A number of sporting events were cancelled which also affected
domestic activity unrelated to tourism. These include horseracing,
greyhound racing, and so forth. Unfortunately data on the number of
events cancelled and the associated activity lost are not available.
5.12
While the aggregate data indicate that the tourism sector was affected,
it is necessary to examine the trends in some detail to establish robust
estimates of the impact. This analysis is undertaken in this section.
Visitor Numbers
5.13
This section outlines the total numbers of overseas visitors that came
to Ireland in the first and second quarters of 2001, and compares them
to visitor numbers in the corresponding periods of 2000.
5.14
Table 5.1 shows that between January and March of 2001, a total of 1
million overseas visitors came to Ireland, with over 1.6 million
overseas visitors visiting between April and June of 2001. In contrast,
1.1 million overseas visitors came to Ireland between January and
March of 2000, while 1.8 million arrived between April and June 2000.
Hence, there was a decline in overseas visitor numbers to Ireland in
the first half of 2001 compared with 2000.
Indecon
February 2002
56
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.1: Overseas Visitors to Ireland by Route of Travel (000s)
2000
2001
Jan-Mar
Apr-Jun
Jan-Mar
Apr-Jun
Air Cross-Channel
606
782
600
753
Sea Cross-Channel
215
496
178
392
Continental Europe
156
338
172
342
Transatlantic
87
153
91
161
1,065
1,768
1,040
1,647
Total Overseas
Source: CSO, “Tourism and Travel” 28 September 2001
5.15
Table 5.1 shows those visitors who travelled cross-Channel by air and
sea, those who came from continental Europe, and those who came
transatlantic. For all quarters reported, the highest proportion of
visitors came cross-Channel by air, at 46 % of all visitors between
April and June of 2001.
5.16
Table 5.2 indicates the percentage change in overseas visitor numbers
between 2000 and 2001, for the first and second quarters. In overall
terms, overseas visitor numbers were 2.4 % lower in the first quarter
of 2001 than in the first quarter of 2000, and were 6.8 % lower in the
second quarter of 2001 than in the second quarter of 2000.
5.17
The decline in overseas visitor numbers is most marked for those
travelling cross-Channel by sea. According to the available data, there
was a decline of 17.2 % in the first quarter and 21.0 % in the second
quarter, between 2000 and 2001.
Indecon
February 2002
57
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.2: Overseas Visitors to Ireland by Route of Travel Percentage Change from 2000 to 2001
2000 to 2001
Jan-Mar
Apr-Jun
Air Cross-Channel
-0.99%
-3.71%
Sea Cross-Channel
-17.21%
-20.97%
Continental Europe
10.26%
1.18%
Transatlantic
4.60%
5.23%
Total Overseas
-2.35%
-6.84%
Source: Indecon calculations from CSO, “Tourism and Travel” 28 September
2001
5.18
It is also useful to consider a breakdown of visitors to Ireland by
country of origin. Table 5.3 reports the number of overseas visitors to
Ireland by area of residence for the first and second quarters of 2000
and 2001. This data shows that a majority of overseas visits to Ireland
are made by those resident in Great Britain, with the next highest
proportions residing in Mainland Europe, followed by the USA and
Canada.
Indecon
February 2002
58
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.3: Overseas Visitors to Ireland by Area of Residence (000s)
2000
2001
Jan-Mar
Apr-Jun
Jan-Mar
Apr-Jun
Great Britain
683
996
632
903
Other Europe
188
403
203
395
USA and Canada
155
297
160
274
Other Areas
38
69
43
76
1,065
1,768
1,040
1,647
Total Overseas
Source: CSO, “Tourism and Travel” 28 September 2001
5.19
Table 5.4 shows the percentage change in the number of overseas
visitors to Ireland, again differentiating by country of origin. The
proportionate decrease in visitor numbers is considerably greater for
those resident in Great Britain. Between the first quarters of 2000 and
2001, there was a decrease of 7.5 % in the number of visitors from
Britain, while the proportionate decrease was even greater between
the second quarters of 2000 and 2001, at 9.3 %. This reflects both the
effects of FMD in the UK and the impact of the restrictions imposed in
Ireland.
5.20
These large proportionate decreases in visits from Britain are in
contrast to changes in visitor numbers from other countries. For other
European countries, the CSO data shows an increase of 8 % in visitor
numbers from the first quarter of 2000 to the first quarter of 2001,
while there was a small decline (2 %) between second quarters. The
year-on-year changes for those resident in the USA and Canada were
3.2 % and –7.7 % respectively.
Indecon
February 2002
59
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.4: Overseas Visitors to Ireland by Area of Residence Percentage Change from 2000 to 2001
2000 to 2001
Jan-Mar
Apr-Jun
Great Britain
-7.47%
-9.34%
Other Europe
7.98%
-1.99%
USA and Canada
3.23%
-7.74%
Other Areas
13.16%
10.14%
Total Overseas
-2.35%
-6.84%
Source: Indecon calculations from CSO, “Tourism and Travel” 28 September
2001
5.21
While Britain, Europe, USA and Canada show proportionate falls in
the second quarter, Britain has the greatest proportionate second
quarter fall, and the only first quarter decrease. Given the timing of
the decline in visitor numbers from Great Britain, this is probably
largely to FMD. In our view the decline for the US and Canada
reflects both FMD effects and the general economic slowdown.
5.22
Examining the number of visitors by reason of visit can help to
explain some of these trends. Table 5.5 presents data on visitor
numbers to Ireland by reason for journey, and shows that the majority
of visits to Ireland are for holiday/leisure/recreation purposes. In the
first half of 2001 for example, 51 % of visits were for these purposes.
Interestingly however, there is some seasonal variation. While in the
first quarter of 2001, 25 % of visits were for business purposes and 40
% were for holiday/leisure/recreation purposes, in the second quarter
the corresponding proportions were 15 % and 57 % respectively.
Indecon
February 2002
60
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.5: Overseas Visitors to Ireland by Reason for Journey
(000s)
2000
2001
Jan-Mar
Apr-Jun
Jan-Mar
Apr-Jun
Business
270
251
257
251
Holiday/Leisure/
Recreation
398
1,062
417
955
Visit to Friends/
Relatives
336
364
311
378
Other
59
89
57
63
1,065
1,768
1,040
1,647
Total Overseas
Source: CSO, “Tourism and Travel” 28 September 2001
5.23
Table 5.6 presents the percentage change in visitor numbers for the
first and second quarters of 2001 compared to 2000, and shows that
the changes vary by journey reason. For those travelling for business
purposes or visiting friends or relatives there is a first quarter
decrease, while for those visiting for holiday reasons there is a first
quarter increase of 5%, and a second quarter decline of 10 %.
Table 5.6: Overseas Visitors to Ireland by Reason for Journey Percentage Change from 2000 to 2001
2000 to 2001
Jan-Mar
Apr-Jun
Business
-4.81%
0.00%
Holiday/Leisure/Recreation
4.77%
-10.08%
Visit to Friends/ Relatives
-7.44%
3.85%
Other
-3.39%
-29.21%
Total Overseas
-2.35%
-6.84%
Source: Indecon calculations from CSO, “Tourism and Travel” 28 September
2001
Indecon
February 2002
61
Section 5
Estimated Economic Impact on Tourism Sector
5.24
To summarise, overseas visitor numbers were 2.4 % lower in the first
quarter of 2001 than in the first quarter of 2000, and were 6.8 % lower
in the second quarter of 2001 than in the second quarter of 2000.
Furthermore, the decline in overseas visitor numbers is most marked
for those travelling cross-Channel by sea. The data also shows that
the decrease in visitor numbers is considerably greater for those
resident in Great Britain. Given the timing of these falls, it seems clear
that FMD effects reduced the number of visitors to Ireland from this
market. The overall reduction in overseas visitor numbers may also
be due to other factors, such as the global economic slowdown.
5.25
Additional visitor number data from Bord Failte are presented in
Annex 2, and confirm the findings in this sub-section.
Duration of Stay of Visitors
5.26
The overall size of the Irish tourism industry is a function of both the
number of visitors to Ireland and the average duration of each visit9.
This sub-section assesses whether there is evidence that the duration
of visits to Ireland declined during FMD crisis.
5.27
Average duration will depend on the time of year of a visit as well as
visit type, journey type, and country of origin of visitor. Table 5.7
shows that the average length of stay by non-resident overseas visitors
to Ireland in the first quarter of 2001 was 6.6 nights, and 7.4 nights in
the second quarter of 2001. These averages represent changes from
the corresponding quarters in the previous year, when the average
duration of stay was 6.9 nights and 7.3 nights in the first and second
quarters respectively.
9
It is of course also a function of how much visitors spend which is an issue considered in subsequent
sections.
Indecon
February 2002
62
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.7: Overseas Visitors to Ireland by Non-Residents (More
Than One Day) - Average Length of Stay by Route of Travel
(Nights)
2000
2001
Jan-Mar
Apr-Jun
Jan-Mar
Apr-Jun
Air Cross-Channel
5.6
5.9
5.7
5.8
Sea Cross-Channel
7.6
7.1
6.5
7.2
Continental Europe
8.7
9.6
8.2
9.8
Transatlantic
10.3
10.1
9.8
9.9
Total Overseas
6.9
7.3
6.6
7.4
Source: CSO, “Tourism and Travel” 28 September 2001
5.28
Table 5.8 presents the percentage change in the average length of stay
by route of travel. While the data shows a first quarter fall of 4.4 %
between 2000 and 2001, from 6.9 to 6.6 nights, there was a second
quarter increase from 2000 to 2001 of 1.4 %, from 7.3 to 7.4 nights.
Interestingly however, this pattern is not consistent across travel
routes. The average duration of stay fell sharply in the first quarter of
2000 for those travelling cross-Channel by sea, and increased
marginally in the second quarter (relative to 2000).
Indecon
February 2002
63
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.8: Overseas Visitors to Ireland by Non-Residents (More
Than One Day) - Percentage Change in Average Length of Stay by
Route of Travel (%)
2000 to 2001
Jan-Mar
Apr-Jun
Air Cross-Channel
1.79%
-1.69%
Sea Cross-Channel
-14.47%
1.41%
Continental Europe
-5.75%
2.08%
Transatlantic
-4.85%
-1.98%
Total Overseas
-4.35%
1.37%
Source: Indecon calculations from CSO, “Tourism and Travel” 28 September
2001
5.29
Also of interest is the average duration of visit differentiated by area
of residence of visitors. Table 5.9 shows that there is considerable
variation in the average length of visits depending on the area of
origin of visitors, with those travelling from Great Britain spending
the least time on average in Ireland at, for example, 5.2 nights in the
second quarter of 2001. Those travelling from continental Europe and
the USA and Canada tend to spend more nights on average.
Indecon
February 2002
64
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.9: Overseas Visitors to Ireland by Non-Residents (More
Than One Day) - Average Length of Stay by Area of Residence
(Nights)
2000
2001
Jan-Mar
Apr-Jun
Jan-Mar
Apr-Jun
Great Britain
5.5
5.5
4.9
5.2
Other Europe
8.4
9.7
8.5
10
USA and Canada
9.4
9.2
9.2
9.3
Other Areas
13.2
10
12.4
10.7
Total Overseas
6.9
7.3
6.6
7.4
Source: CSO, “Tourism and Travel” 28 September 2001
5.30
In analysing the impact of FMD in Ireland on the tourism sector, the
percentage change in the average length of stay of visitors by area of
residence is interesting. Table 5.10 shows that the largest decrease in
average visit durations are evident amongst those travelling from
Great Britain. In fact, according to the CSO data, the average length of
stay by visitors from Great Britain fell by 11 % between the first
quarters of 2000 and 2001, and by 5.5 % between the second quarters
of 2000 and 2001. It should also be recalled that, as discussed in the
previous section, visitor numbers from Great Britain showed a
significant decrease in both periods. Hence during the outbreak of
Foot and Mouth Disease in Ireland and in Britain, less people travelled
from Britain to Ireland, and of those who did, they tended on average
to stay for a shorter period of time.
Indecon
February 2002
65
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.10: Overseas Visitors to Ireland by Non-Residents (More
Than One Day) - Percentage Change in Average Length of Stay by
Area of Residence (%)
2000 to 2001
Jan-Mar
Apr-Jun
Great Britain
-10.91%
-5.45%
Other Europe
1.19%
3.09%
USA and Canada
-2.13%
1.09%
Other Areas
-6.06%
7.00%
Total Overseas
-4.35%
1.37%
Source: Indecon calculations from CSO, “Tourism and Travel” 28 September
2001
5.31
Table 5.11 presents the average duration of visits by reason of journey
and shows that on average, business visits tend to be of a shorter
length than visits for holiday/leisure/recreation purposes, or visits to
friends or relatives.
Table 5.11: Overseas Visitors to Ireland by Non-Residents (More
Than One Day) - Average Length of Stay by Reason for Journey
(Nights)
2000
2001
Jan-Mar
Apr-Jun
Jan-Mar
Apr-Jun
Business
4.9
5.8
5.4
6
Holiday/Leisure/
Recreation
5.8
6.9
5.4
7.1
Visit to Friends/
Relatives
8.6
7.9
8
7.7
Other
12.1
13.3
12.7
15
Total Overseas
6.9
7.3
6.6
7.4
Source: CSO, “Tourism and Travel” 28 September 2001
Indecon
February 2002
66
Section 5
5.32
Estimated Economic Impact on Tourism Sector
Interestingly, the percentage change in the average length of stay by
reason of journey, as presented in Table 5.12, shows that the average
duration of business visits actually increased between the first and
second quarters of 2000 and 2001 respectively. Average durations fell
between the first quarter of 2000 and the first quarter of 2001 for
holiday visits and for visits to friends/relatives.
Table 5.12: Overseas Visitors to Ireland by Non-Residents (More
Than One Day) - Percentage Change in Average Length of Stay by
Reason for Journey (%)
2000 to 2001
Jan-Mar
Apr-Jun
Business
10.20%
3.45%
Holiday/Leisure/Recreation
-6.90%
2.90%
Visit to Friends/Relatives
-6.98%
-2.53%
Other
4.96%
12.78%
Total Overseas
-4.35%
1.37%
Source: Indecon calculations from CSO, “Tourism and Travel” 28 September
2001
5.33
Data are also available on the number of bed-nights spent classified by
type of accommodation used. For the purpose of this analysis,
accommodation type is divided into: hotel accommodation;
guesthouses and B&Bs; rented houses and apartments; caravan and
camping; hostels; friends and relatives; and other forms of
accommodation. Table 5.13 shows that the proportions staying in
different accommodation type varies by season, and that hotels as
well as staying with friends and relatives are generally the most
popular type of accommodation.
Indecon
February 2002
67
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.13: Overseas Visitors to Ireland by Non-Residents (More
Than One Day) - Number of Bednights Classified by Type of
Accommodation Used
2000
2001
Jan-Mar
Apr-Jun
Jan-Mar
Apr-Jun
1,233
2,677
1,339
2,465
Guest House/B&B
805
2,482
890
2,419
Rented House/
Apartment
780
2,466
1,002
1,948
Caravan/Camping
24
195
43
292
Hostel
190
404
285
466
3,334
2,380
2,321
2,524
550
1,571
611
1,183
6,916
12,175
6,491
11,297
Hotel
Friends/Relatives
Other
Accommodation
Source: CSO, “Tourism and Travel” 28 September 2001
5.34
Table 5.14 presents estimates of the percentage change in the number
of bed-nights classified by type of accommodation used for the
relevant quarters. The data suggests that there were decreases in the
overall number of bed-nights, as well as second quarter decreases in
bed-nights in hotels, guesthouses/B&Bs, as well as rented houses and
apartments. The number of bed-nights spent with friends and
relatives decreased in the first quarter by 30.4 % but increased in the
second quarter by 6 %. These data would tend to support conclusions
reached earlier in this section in relation to decreases in visit durations
during the first half of 2001.
Indecon
February 2002
68
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.14: Overseas Visitors to Ireland by Non-Residents (More
Than One Day) - Percentage Change in Number of Bed-nights
Classified by Type of Accommodation Used (%)
2000 to 2001
Jan-Mar
Apr-Jun
Hotel
8.60%
-7.92%
Guest House/B&B
10.56%
-2.54%
Rented House/Apartment
28.46%
-21.01%
Caravan/Camping
79.17%
49.74%
Hostel
50.00%
15.35%
Friends/Relatives
-30.38%
6.05%
Other
11.09%
-24.70%
Accommodation
-6.15%
-7.21%
Source: Indecon calculations from CSO, “Tourism and Travel” 28 September 2001
5.35
To summarise, the average length of stay by non-resident overseas
visitors to Ireland showed year-on-year percentage changes of –4.9%
and 1.4% in the first and second quarters of 2001 respectively. The
data also shows that there is considerable variation in the average
length of visits depending on the area of origin of visitors, with those
travelling from Great Britain spending the least time on average.
Furthermore, the average length of stay by visitors from Great Britain
fell by 11 % between the first quarters of 2000 and 2001, and by 5.5 %
between the second quarters of 2000 and 2001.
Indecon
February 2002
69
Section 5
Estimated Economic Impact on Tourism Sector
Expenditure per Visitor and Total Revenues
5.36
The amount that visitors spend during their stay in Ireland is also
important. This is examined in this section.
5.37
Table 5.15 shows that as of 2000, visitors from North America and the
rest of the world spent more on average, at between €668 and €688
respectively10. Visitors from Britain spent €320 on average per trip,
while visitors from continental Europe spent €507 on average per visit.
Visitors from Northern Ireland are estimated, on the basis of the Bord
Failte data, to have spent €255 per visit, while average spending on
domestic trips is estimated at €167.
Table 5.15: Expenditure per Tourist by Place of Residence 19962000 (€)
1996
1997
1998
1999
2000
Britain
281.4
304.2
300.7
295.0
320.0
Mainland
Europe
503.3
497.6
472.7
477.3
507.0
North
America
551.4
569.0
568.8
584.3
667.8
Rest of
World
636.9
594.4
591.8
597.3
688.2
Total
Overseas
393.5
402.9
392.9
394.8
437.4
Northern
Ireland
177.8
223.1
230.7
249.5
255.0
Total Outof-State
368.7
384.2
378.6
383.8
424.3
Domestic
Trips
119.1
124.3
137.5
153.3
166.6
Source: Indecon calculations from data from Bord Failte, Tourism Facts 2000
10
Annex 3 presents detailed data on tourist numbers and tourism revenues by area of residence from 1996
to 2000.
Indecon
February 2002
70
Section 5
Estimated Economic Impact on Tourism Sector
5.38
Hence, there appears to be considerable variation in the average
expenditure per tourist depending on the origin of visit. This is
crucial in estimating the overall cost to the tourism industry in Ireland
of FMD.
5.39
Table 5.16 presents estimated earnings from all visitors to Ireland
during the first and second quarters from 1995 to 2001. It shows that
first quarter earnings grew steadily from €307 million in 1995 to €588
million in 2001. A similar trend can be found in second quarter
earnings, with an increase in earnings from €533 million in 1995 to €1
billion in 2001. Moreover, there is an actual increase in earnings in the
first half of the year despite the fall in both visitor numbers and length
of stay of visitors.
Table 5.16: Estimated Earnings from all Visitors to Ireland - €
Million
Jan-Mar
Apr-Jun
1995
307
533
1996
336
658
1997
376
725
1998
423
787
1999
481
847
2000
554
998
2001
588
1023
Source: CSO, “Tourism and Travel” 28 September 2001
5.40
Table 5.17 shows the percentage change in quarterly earnings over
time, and suggests that while there were large increases in quarterly
earnings from 1995 to 2000, these growth rates have declined
significantly between 2000 and 2001. However, the increases are
difficult to explain given the fall in the number of visitors and the
duration of visits.
Indecon
February 2002
71
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.17: Estimated Earnings from all Visitors to Ireland Percentage Change from Previous Year (%)
Jan-Mar
Apr-Jun
1995
-
-
1996
9.50%
23.33%
1997
11.70%
10.23%
1998
12.50%
8.58%
1999
13.81%
7.58%
2000
15.04%
17.84%
2001
6.19%
2.54%
Source: Indecon calculations from CSO, “Tourism and Travel” 28 September
2001
Impact of FMD on Domestic Tourism
5.41
The preceding analysis clearly shows a decline in overseas visitor
numbers which in our view is largely the result of FMD. Table 5.18
presents domestic tourism trips and revenues for the period from
January to August for each of the years from 1997 to 2001 inclusive.
For the first three-quarters of 2001 over 2000, there was an increase in
total trips of 11.8 %, and an increase in domestic revenues of 16.3 %.
These numbers suggest that FMD may have given a boost to domestic
tourism as more people decided to holiday at home, perhaps due in
part to marketing/pricing activities of the tourism industry.
Indecon
February 2002
72
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.18: Domestic Tourism Data - January to August - 1997 to
2001
1997
1998
1999
2000
2001
% Chg 00 to 01
Trips
(000s)
2,423
2,484
2,354
2,508
2,803
11.8
Revenues
(€m)
404.71
460.72
468.72
540.50
628.40
16.3
Source: Bord Failte, Irish Travel Survey
Regional Impacts of FMD
5.42
Another important consideration involves assessing the regional
impacts of FMD. Niche products such as equestrian activities, golf,
trekking, farm holidays, cultural and heritage centres, angling and
fishing, are generally concentrated in rural areas and provide
important employment and economic activity in these regions. As
discussed in previous sections, the FMD crisis resulted in the
cancellation or postponement of many such activities and events, and
undoubtedly had a significant impact in rural areas where there are
generally less alternative employment opportunities available.
5.43
Hence it is informative to investigate if there are regional variations in
visitor numbers across Ireland in the months during and following the
FMD crisis. Table 5.19 presents the year-on-year percentage change in
overseas visitor numbers between January and August of 2000 and
January and August of 2001, by region. Overall the data suggests that
overseas visitor numbers were down by 6.5% in 2001. The regional
indicators suggest that there is considerable regional variation, and
that in general rural areas seem to be doing worse11.
11 Caution should be exercised in considering these numbers as the regional estimates are
based on smaller sample sizes. While there is low sampling error associated with the overall
Ireland-wide estimate, as the data is broken down by region, the sampling error will increase,
and thus estimates should be considered as indicative. However, while there are caveats
associated with the actual percentage changes, the relative magnitudes of these changes are
useful to consider. It should be noted that during a trip to Ireland, overseas visitors can stay in
more than one region.
Indecon
February 2002
73
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.19: Percentage Change in Overseas Visitor Numbers
Between 2000 and 2001 for January to August Period by Region
Region
Percentage Change
Dublin
-6.5%
Midlands/East
-13.2%
South East
-16.4%
South West
-18.6%
Shannon
-6.5%
West
-14.7%
North West
-27.3%
Source: Indecon calculations from Bord Failte data
5.44
The data in Table 5.19 suggests that the percentage decrease in visitor
numbers to the Dublin and Shannon regions equivalent. On the other
hand, the South West and North West regions showed percentage
decreases in overseas visitor numbers of 16% and 27% respectively.
These figures indicate significant regional variation and suggest that
rural areas fared worse during, and in the aftermath of, the FMD
crisis.12
5.45
Data on hotel occupancy rates are also available. Table 5.20 presents
these data for 1999 to 2001, and shows that while there was an
increase in occupancy from 1999 to 2000, there was a significant drop
off in 2001 to 63%.
12
Annex 4 presents the regional distribution overseas visitor numbers in more detail.
Indecon
February 2002
74
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.20: Hotel Occupancy Rates - 1999 to 2001
Year
Rate
1999
67%
2000
68%
2001
63%
Source: Bord Failte
5.46
Table 5.21 presents hotel occupancy rates by region for January to
October, for 1999, 2000, and 2001 in percentage terms. Again the data
shows considerable variation, though the trends seem to confirm the
findings presented above in Table 5.19 in relation to decreases in
overseas visitors. One exception to this is the small proportionate fall
in hotel occupancy rates in the North West vis-à-vis the large
proportionate decrease in overseas visitors to the region. This may
reflect the fact that a large proportion of visitors to the North-West
region are from Northern Ireland, and the number of these visitors
may not have been affected by the FMD scare to the same extent as
overseas visitors.
Table 5.21: Hotel Room Occupancy Rates by Region (%)
1999
2000
2001
Dublin
77
76
71
Mid East
54
60
55
South East
65
65
56
South West
67
70
65
Shannon
64
66
64
West
62
58
53
North West
58
59
57
National
67
68
63
Source: Bord Failte
Indecon
February 2002
75
Section 5
5.47
Estimated Economic Impact on Tourism Sector
Further details of the regional impact of FMD are available from
Shannon Development. Its July “Shannon Pulse” survey looked at the
performance of tourism businesses throughout the Shannon region
from January to June of 2001, and found that FMD had impacted
significantly on the region’s tourism season. Overall the study found
that 74% of businesses indicated that their holiday/leisure business
from January to June was down on the corresponding period of 2000.
the report indicated that overseas business was the worst affected.
The report highlights the point that the businesses operating in areas
in which the FMD restrictions operated, namely rural areas, were the
businesses that experienced the greatest downturns in activity.
Quantifying the Costs of FMD to the Tourism
Industry
5.48
In previous sections we have examined overall tourism trends. In this
section we estimate the impact of FMD on the sector given the
available information13.
5.49
The earlier analysis showed an actual increase in overseas tourism
revenues in the first half of 2001, despite the fact that both visitor
numbers and average duration of stay fell during the period. It is
plausible to assume that in the absence of FMD, these revenues would
have increased further. To calculate these potential losses, our
analysis seeks to estimate the number of overseas and domestic
tourists that would have holidayed in Ireland in the absence of FMD.
There is no available methodology that can provide a definitive
estimate of these losses as tourism trends are affected by a number of
factors. Nevertheless, the approaches adopted provide a reasonable
estimate of the FMD impact.
5.50
One approach involves multiplying the reduction in overseas visitor
numbers by average expenditure per tourist. Overseas visitor
numbers are available by market, as per Table 5.3, and hence it is
straightforward to calculate the year-on-year reduction in visitor
numbers from each market, for the first half of 2001. Multiplying
these visitor number declines by the average expenditure per visitor
per market provides a cost estimate for each market. Summing over
these estimates provides an estimate of overall losses.
13
The detailed CSO overseas visitor data is currently available only for the first two quarters of 2001. It is
likely however that the main impact of FMD was felt in this period. Furthermore, domestic tourism
data was only available for the first nine months of 2001.
Indecon
February 2002
76
Section 5
5.51
Estimated Economic Impact on Tourism Sector
Table 5.22 presents an initial indicative estimate of the reduction in
tourism revenues from FMD by market. This is based on the halfyearly change in visitor numbers between 2000 and 2001 for each
market and the average tourist spend by market.
In calculating
average tourist spend per market, estimates of spending in 2000 were
used as per Table 5.15. These 2000 estimates were then adjusted for
inflation14 to provide an estimate of average tourist spend per market
in 2001.
Table 5.22: Initial Indicative Estimated Losses in Overseas
Tourism Revenues Due to FMD
Overseas Visitors
(000s)
Change in
Overseas
Visitors
(000s)
Average
Tourist
Spend by
Market
Total
Reduced
Revenues
by Market
Jan–Jun
2000
Jan–Jun
2001
Jan–Jun
2000 to 2001
2001 - €
€ Million
1,679
1,535
-144
333.4
-48.0
Other EU
591
598
7
528.3
3.7
US
452
434
-18
695.8
-12.5
Other
107
119
12
717.1
8.6
2,833
2,687
-146
Britain
Total
Overseas
-48.2
Source: Indecon analysis
5.52
14
According to these preliminary estimates, the total reduction in
tourism revenues in the first half of 2001 is equal to €48.2 million
mainly due to a weak performance in the UK market. It could be
assumed that the entire decline is due to FMD, however, there are
other factors that explain the under-performance including the
slowdown in economic activity.
An annual inflation rate of 4.2 % was assumed, inline with CSO estimates.
Indecon
February 2002
77
Section 5
Estimated Economic Impact on Tourism Sector
5.53
The above indicative estimates do not take into consideration the
likelihood that the tourism industry would have grown in the absence
of FMD. Hence the cost of the FMD outbreak is a function not only of
reduced visitor numbers, but also of the opportunity cost of lost
overseas tourism market growth. In order to gauge this effect, it is
necessary to make an assumption about likely growth in the number
of overseas visitor to Ireland. The question is: what would have
happened to growth in visitor numbers in the absence of FMD?
5.54
One approach involves calculating the average growth rate from
previous years and applying these growth rates to visitor number in
the first half of 2000. This would give an estimate of what overseas
tourist numbers would have been in the first half of 2001 in the
absence of FMD if visits had continued to increase at the trend growth
rate. However, for the purposes of this estimation we assume that
overseas visitor numbers would have grown by 50 % of the average
annual growth rate of the past five years. This reflects the fact that
other factors such as the global economic downturn may have caused
the growth rate to decline even in the absence of FMD. Furthermore,
it is reasonable to assume that there is some saturation point in the
numbers of visitors to Ireland each year.
5.55
Table 5.23 presents the estimated average annual growth rates in the
number of overseas visitors to Ireland between 1996 and 2000 by
market. These are calculated from the data presented in Table A3.1 in
Annex 3. For example, the number of overseas visitors grew by 7.6%
on average per annum over the period, with the highest proportionate
average growth rate coming from the North America market, at 9.8%.
Table 5.23: Estimated Average Annual Growth Rates in the
Number of Overseas Visitors to Ireland between 1996 and 2000 by
Market
Market
Average Annual Growth Rate (%)
Britain
7.8%
Mainland Europe
5.4%
North America
9.8%
Rest of World
9.0%
Total Overseas
7.6%
Source: Indecon analysis
Indecon
February 2002
78
Section 5
5.56
Estimated Economic Impact on Tourism Sector
Given these estimated annual growth rates, we estimate a
hypothetical number of overseas visitors to Ireland in the first half of
2001. Table 5.24 presents these numbers as well as the difference
between these estimates and actual visitor numbers. This difference is
then used as a proxy for actual overseas visitor losses for the first half
of 2001.
Table 5.24: Estimated Decrease in Overseas Visitors to Ireland in
First Half of 2001 by Market (000s)
Market
Actual
Visits: JanJun 2000
Projected
Visits: JanJun 2001
Actual
visits: JanJun 2001
Estimated
Decrease
Britain
1,679
1,745
1,535
-210
Mainland Europe
591
607
598
-9
North America
452
474
434
-40
Rest of World
107
112
119
7
Total Overseas
2,833
2,940
2,687
-253
Source: Indecon analysis
5.57
With these numbers, it is possible to calculate the total decrease in
revenues accruing to each market, and to the overall market, by using
average expenditures per tourist for each market.
Indecon
February 2002
79
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.25: Estimated Total Decrease in Revenues from Reduced
Overseas Visitor Numbers in the first half of 2001 by Market
Market
Estimated
Decrease (000s)
Estimated
Average Spend
by Market (€)
Loss in
Revenues (€
million)
Britain
-210
333.4
-69.9
Mainland Europe
-9
528.3
-4.7
North America
-40
695.8
-28
Rest of World
7
717.1
5.2
Total Overseas
-253
-97.3
Source: Indecon analysis
5.58
On the assumption that visitor numbers would have increased by 50
% of the average annual growth rate in recent years, lost revenues
from the decrease in overseas visitors to Ireland are estimated to be in
the region of €97 million. Of course these are very tentative estimates
and assume that in the absence of FMD, tourist numbers would have
increased. The fact that a lower increase in numbers in 2001 could
have been expected due to weaker economic conditions and other
factors is factored into our estimates.
Impact of FMD on Domestic Tourism
5.59
Following the same methodology, it is possible to estimate the impact
of FMD on the domestic tourist market. Table 5.26 below presents the
estimated change in the number of domestic trips taken between 2000
and 2001.
Indecon
February 2002
80
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.26: Estimated Change in Domestic Tourist Trips Between
2000 and 2001 – January to August Period
Trips (000s)
2000
2001
Estimated Change
2,508
2,803
295
Source: Indecon calculations
5.60
Table 5.26 shows that the number of domestic trips in the January to
August period actually increased by 295,000 between 2000 and 2001.
We must consider however that domestic tourism has been growing
over recent years at a rate of 1.6 %. Applying this growth rate to the
2000 figures gives the estimated number of trips in 2001 in line with
recent trends. The difference between this estimate and the actual
number of domestic trips is our proxy for the actual change in
domestic tourism given FMD.
Table 5.27: Estimate Change in Domestic Tourist Trips Between
2000 and 2001 Assuming Growth in the Domestic Tourist Market –
January to August Period
Trips (000s)
2000 - Actual
2001 Estimated
2001 - Actual
Estimated
Change
2,508
2,537
2,803
266
Source: Indecon calculations
5.61
15
Hence, the estimates suggest that there were 266,000 domestic tourists
above trend. As domestic tourists are estimated to have spent €173.6
on average in 2001 (adjusting for inflation15), the increase in revenues
is estimated to be €46.2 million. Not all of this increase is due to FMD
and Table 5.28 presents a range of likely estimates.
Once again, an assumed annual inflation rate of 4.2 % is assumed.
Indecon
February 2002
81
Section 5
Estimated Economic Impact on Tourism Sector
Table 5.28: Estimate Change in Domestic Tourist Trip Revenues
Between 2000 and 2001 Assuming Growth in the Domestic Tourist
Market – January to August Period
Increase
Revenues
(€ million)
Increase Due to FMD Assuming:
10% FMD
Impact
20% FMD Impact
50% FMD
Impact
4.6
9.2
23.1
46.2
Source: Indecon calculations
Other Effects
5.62
In addition, other domestic economic activities that are not necessarily
tourist-related were affected due to the restrictions on movements.
These include the cancellation of sporting events including
horseracing and greyhound racing. It could also include the impact
on the haulage sector and other elements of the transport and services
sector.
5.63
It is however difficult to disentangle these possible FMD effects from
other general economic factors. For completeness it is decided to
estimate these losses at around €25 million.
Overall Impact
5.64
5.65
Finally, we provide an overall estimate of the impacts of FMD in
Ireland. Table 5.29 presents a breakdown of the:
•
Estimated losses for the overseas tourism market;
•
Estimated gains for the domestic tourist market; and,
•
Losses for other non-tourism and non-agriculture sector.
There are also likely to be additional multiplier effects that account for
the impact of this loss of expenditure on other sectors of the economy.
As discussed in chapter 4, the multiplier tells us how much output
changes in the whole economy across all sectors when there is a shift
in aggregate demand.
Indecon
February 2002
82
Section 5
5.66
Estimated Economic Impact on Tourism Sector
Once again, we assume that the value of the multiplier is 1.7, in line
with research evidence for Ireland. This adds a further €96.7 million
to these cost estimates. Hence, the best indicative estimate is that
there were tourism-related costs from FMD of around €210 million.
Table 5.29: Summary of Main Impacts of FMD on the Tourism
Industry and Other Sectors in Ireland
Estimated Tourism (Losses)/Gains
€ Million
•
Overseas visitor market
(97.3)
•
Domestic tourist market
9.2
•
Other Sectors
(25)
•
First round Total
(113.1)
•
Second round tourism impacts
(96.7)
•
Total
(209.8)
Source: Indecon analysis
5.67
Overall the total loss to the tourism sector as a result of FMD is
estimated to be in the region of €210 million, with a heavy
concentration in the rural economy. This relates to the loss for the six
months to the end of September 2001. It is likely that the negative
impact of FMD for the tourism sector extended beyond this period.
Indecon
February 2002
83
Section 6
6
Exchequer Costs
Exchequer Costs
Introduction
6.1
It is also necessary to assess the exchequer costs arising from the FMD
outbreak. These were identified in Chapter 4 and are set out again in
Table 6.1 for convenience.
Table 6.1: Exchequer Costs of FMD
1.
Cost of Time Spent by Departmental Officials
2.
Cost of Gardaí and Army Time
3.
Cost of Culling and Disposal
4.
Cost of the Compensation Package Provided
5.
Cost of Additional Tourism Promotion
6.
Impact on Tax Receipts
Source: Indecon
Costs of Imposing the Restrictions, Culling
and Compensation
6.2
The actual cost of imposing the various restrictions is the first cost to
be considered. As discussed previously, officials from a number of
Government Departments and agencies undertook a comprehensive
operation at the air and seaports. This led to direct costs in terms of
overtime payments and also to costs due to the work forgone during
the operations. Costs were also incurred during the culling of animals
in the Cooley Peninsula. Furthermore, in response to the FMD
outbreak, the State introduced a compensation scheme that was fully
funded by the Irish Exchequer.
6.3
The latest estimates from the Department of Agriculture, Food and
Rural Development suggest that expenditure by the Department in
relation to FMD amounted to €44.4 million. This includes payments
amounting to €10.1 million in relation to compensation, €16 million in
relation to general expenses, and staff costs (overtime, travel and
subsistence) of €18.3 million.
Indecon
February 2002
84
Section 6
Exchequer Costs
6.4
In response to the crisis facing the tourism sector, there was an
additional allocation made to the budget for promoting Irish tourism.
This amounted to a cost of €12.7 million in the year 2001. We
understand that savings elsewhere in the tourism budget in part
funded this. Nevertheless, the full amount is accounted as a FMD
related Exchequer expenditure.
6.5
Finally, the Gardaí estimate that overtime amounted to €49.5 million.
6.6
Overall then in relation to the costs of imposing the restrictions and
compensation it is estimated that such exchequer costs amounted to
€106.6 million.16
Impact on Tax Receipts
6.7
As part of this Study we have also undertaken an analysis of taxation
receipts. The reasons for this are twofold. Firstly, a slowdown in
economic activity will generally be reflected in a slowdown in the tax
take. Hence, an examination of tax receipts over the first half of 2001
compared to 2000 may indicate the extent of the impact of FMD on
economic activity as a whole. Secondly, should there be evidence of a
fall in the overall tax take as a direct result of FMD, then this would
represent an additional FMD-related exchequer cost.
6.8
Table 6.2 presents data on the year-on-year percentage change in
monthly receipts for excise taxes, income tax, and VAT. While excise
tax receipts show year-on-year decreases for February, March, and
May, the year-on-year changes for income taxes and VAT are all
positive, although they indicate lower growth than previous years.
16
Indecon are awaiting estimates of the costs of culling from the Department, which will be incorporated
into a final version of this Report on receipt.
Indecon
February 2002
85
Section 6
Exchequer Costs
Table 6.2: Year-on-Year Percentage Change in Tax Receipts - 2000 to
2001
Excise
Income Tax
VAT
January
15.7%
14.3%
18.8%
February
-14.9%
9.0%
2.3%
March
-19.6%
6.6%
8.1%
April
1.6%
12.1%
5.3%
May
-27.0%
5.4%
4.1%
June
51.1%
6.2%
-3.5%
July
-25.0%
-4.4%
5.5%
August
-16.6%
-7.4%
-2.4%
September
-1.3%
-12.3%
5.2%
October
4.1%
-9.6%
0.3%
November
17.1%
-7.1%
-3.6%
December
-8.5%
31.0%
34.6%
Source: Indecon analysis of Department of Finance data
6.9
Change in these tax heads in value terms are presented in Table 6.3.
They show that both Vat and Income tax continued to show some
growth in 2001 over 2000 albeit at a slower rate of expansion when
compared with previous years. In contrast excise duty receipts were
well down. For the year as a whole excise duties were down by €213
million. This is a considerable fall and is difficult to explain given
available information.
Indecon
February 2002
86
Section 6
Exchequer Costs
Table 6.3: Cumulative Year-on-Year Change in Tax Receipts - 2000
to 2001
Excise
Income Tax
VAT
January
40.0
104.0
180.2
February
-4.9
161.8
187.7
March
-76.6
205.5
256.0
April
-70.3
295.4
269.9
May
-175.3
348.3
309.3
June
-52.5
386.3
298.9
July
-166.6
360.0
349.7
August
-226.5
309.9
342.0
September
-231.7
228.6
387.9
October
-219.2
131.2
388.9
November
-168.8
47.0
350.4
December
-213.0
234.2
450.2
Source: Indecon analysis of Department of Finance data
6.10
It is assumed by a number of commentators that FMD can explain
some of this underperformance, particularly in the case of excise
duties where the disruption in cross-border trade may be factor.
However, these tax trends are also influenced by wider economic
trends and it is impossible to isolate specific FMD effects. On balance,
it would seem that FMD contributed to an already slowing economy
and adversely affected excise duty receipts. While we do not put an
exact figure on this exchequer cost, it is likely to be significant.
6.11
A summary of the total estimated impact/costs of the FMD outbreak
and the restrictions imposed in Ireland is presented in Table 6.4.
Overall, costs are estimated at €209.6 million, or approximately 0.2 %
of GNP. These are indicative estimates and are subject to a number of
caveats as outlined.
Indecon
February 2002
87
Section 6
Exchequer Costs
Table 6.4: Summary of Total Economy Costs of FMD
Estimated Gains and (Losses)
€ Million
•
Agriculture
106.75
•
Tourism and other Sectors
(209.8)
•
Exchequer Costs
(106.6)
•
Total
(209.6)
•
Total as % of GDP
0.2%
Source: Indecon analysis
Indecon
February 2002
88
Section 7
Impact of FMD in the Absence of Control Measures
7
Impact of FMD in the Absence of Control
Measures
7.1
The second element of this study involves estimating the likely
economic impacts on the main sectors of the Irish economy if the
control measures outlined in previous sections had not been
introduced. This requires specification of the counterfactual of a
widespread outbreak of FMD in Ireland.
7.2
A widespread outbreak would have significant effects on the
agriculture, tourism, and other sectors. The impact on the agriculture
sector of such a scenario is addressed initially.
Agriculture Sector
7.3
The effects for the agriculture sector of a full-scale outbreak of FMD in
Ireland are summarised in Table 7.1.
Table 7.1: The Effects of a Full-Scale Outbreak of FMD in Ireland
1.
A ban on all exports of susceptible products to the EU.
2.
A ban on all exports of susceptible products to non-EU countries.
3.
A comprehensive programme of culling and disposal of animals.
4.
A loss of stock and damage to Ireland’s reputation as a food
producer.
Source: Indecon
7.4
The most significant impact of a widespread FMD outbreak would be
a damaging ban on Irish agri-food exports to EU and non-EU markets.
This impact would depend on the length and scope of the ban, which,
in turn, depends on the assumed extent and duration of the outbreak.
This is difficult to assess but international evidence on FMD outbreaks
internationally, including the recent outbreak in the UK, are used as a
benchmark A range of different scenarios for both the length and
scope of a possible ban are considered in this assessment.
Indecon
February 2002
89
Section 7
7.5
Impact of FMD in the Absence of Control Measures
The extent and scope of any ban on Irish livestock and livestock
products is also likely to vary by export market. For example, Table
7.2 below presents a list of products that are liable to a EU export ban.
This ban could however be subject to a wide range of exemptions,
implying a more limited effective ban.
Table 7.2: Potential Agriculture Products Liable to EU Export Ban
1.
All livestock
2.
Fresh and frozen raw meat products
3.
Milk (other than that which has received double pasteurisation,
UHT, sterilisation or drying treatment)
4.
Milk products (other than those made from milk treated as above,
or which have received heat treatment to 71 degrees Celsius for 15
seconds)
5.
Hides and skins
6.
Offals
7.
Non-certified food products from a set date prior to the first
outbreak of FMD
Source: Davys, Economic Impact of Foot and Mouth Disease
7.6
17
For non-EU markets the position is likely to be different. For example,
for the US a blanket ban on all Irish agricultural exports is more likely,
including all livestock and livestock products. Furthermore, for nonEU countries (excluding the US), it can be assumed that any ban
would relate only to live animals and meat17, but that other
agricultural products would be exempt. Thus, the variation in the
scope of export bans will inform the modelling undertaken.
Assumptions relating to the extent of export bans across markets are
discussed in further detail later in this section.
It should be noted that as a result of BSE, beef products are already banned from most markets.
Indecon
February 2002
90
Section 7
7.7
Impact of FMD in the Absence of Control Measures
Given that the export ban would vary by market, it is useful to
summarise the distribution of Irish agriculture exports by market as
per Table 7.3. These data show that 79.4 % of total Irish agriculture
exports are to EU countries, with 3.7 % to the US, and 17 % to the rest
of the world. For live animals, meat products and dairy products, the
majority of exports are to the EU at 75.3 %, 82.6 %, and 81.7 %
respectively. For casein however, the US is the principal export
market at 57.7 % of total exports.
Table 7.3: Distribution of Irish Agriculture Exports - € and %
EU
US
Rest of World
Total
(€m)
(%)
(€m)
(%)
(€m)
(%)
(€m)
(%)
Live
animals
201.3
75.3%
11.7
4.4%
54.3
20.3%
267.2
100.0%
Meat
products
1091.5
82.6%
0.0
0.0%
230.5
17.4%
1322.0
100.0%
Dairy
products
730.1
81.7%
11.2
1.3%
152.6
17.1%
893.9
100.0%
Casein
48.4
38.3%
72.9
57.7%
5.1
4.0%
126.4
100.0%
2071.3
79.4%
95.8
3.7%
442.4
17.0%
2609.5
100.0%
Total
Source: CSO and Indecon analysis
7.8
In summary, given the distribution of exports by market as per Table
7.3, the FMD-related export restrictions would mainly affect live
animals and meat exports, but would not be significant for other food
exports.
Short Run Effects of FMD Related Export Bans
7.9
In examining the impact of an export ban, we begin by considering the
short-run effects on export values assuming no State or EU
interventions.
Indecon
February 2002
91
Section 7
7.10
7.11
7.12
Impact of FMD in the Absence of Control Measures
The methodology used in our short run analysis draws on elements
employed by the Department of Agriculture, Food and Rural
Development with some notable refinements. The approach takes the
total value of exports for a number of products (listed below), and
disaggregates these export values by market:
-
UK;
-
Other EU markets;
-
Non-EU markets.
Since many food products can contain a meat or dairy element, these
would also be susceptible to an FMD-related export ban. For the
purposes of the analysis in this section, the following products are
considered:
-
Sheep;
-
Beef;
-
Pigs;
-
Poultry and eggs;
-
Butter;
-
Cheese;
-
SMP;
-
Other dairy;
-
Casein;
-
Baby food;
-
Cream Liqueur;
-
Chocolate Crumb;
-
Fat filled milk powder;
-
Live cattle;
-
Miscellaneous edible products;
-
Skins and furs;
-
Flax and wool: and,
-
Animal oil and fat.
The export values of each product per market are known. Using
various assumptions regarding the duration of the export ban and the
level of market access, it is possible to estimate the value of lost
exports for each product. Summing all of these provides an estimate
of the total reduction in export values.
Indecon
February 2002
92
Section 7
7.13
Impact of FMD in the Absence of Control Measures
Of course, different scenarios will provide different estimates. The
methodology employed allows us to specify whether a specific market
is open or closed, and also the duration of market closure. For the
purposes of this study, a number of different scenarios are considered.
These are:
-
A three month ban on Irish agriculture exports in all markets;
-
A three month ban on Irish agriculture exports in UK and EU
markets, and a six month ban for all other markets;
-
A six month ban on Irish agriculture exports in all markets;
-
A six month ban on Irish agriculture exports in UK and EU
markets, and a one year ban for all other markets;
-
A one year ban on Irish agriculture exports in all markets;
-
A one-year ban on Irish agriculture exports in UK and EU
markets, and a two-year ban for all other markets.
7.14
It is worthwhile to consider these different scenarios, as the duration
of any FMD outbreak is uncertain and depends on the scale of the
outbreak and the response of the Authorities. It is our judgement,
based on international experience, that a minimum and maximum ban
of three months and two years are plausible and represent the best
and worst case scenarios.
7.15
The short run impact also depends on the level of market access for
each product type. The assumptions18 adopted are included below:
18
-
For beef products, all markets are assumed 100 % closed;
-
For other meat products, all markets are assumed 100 %
closed;
-
For dairy products, 80 % access is assumed for UK and other
EU markets, while 50 % access is assumed for non-EU markets.
The US and Saudi Arabia markets are assumed closed for
dairy products, however;
-
For other food products, 80 % access is assumed for UK and
other EU markets. 60 % access is assumed for non-EU
markets, except for the US and Saudi Arabia markets, which
are again assumed closed.
The assumed level of market access is subjective. These percentages are based on views provided by the
Department of Agriculture, Food and Rural Development that were supported by Indecon’s
independent analysis.
Indecon
February 2002
93
Section 7
7.16
Impact of FMD in the Absence of Control Measures
Based on these assumptions, a widespread FMD outbreak is assumed
to result in a complete worldwide ban on livestock and meat exports
and a limited ban on other agricultural products, including dairy
products. Indicative estimates are presented in Table 7.4 and show
the value of the exports lost under different scenarios. In the best-case
scenario, namely scenario A, a three month export ban is assumed and
it is estimated that the reduction in exports equal €0.9 billion. If
however non-EU markets imposed a longer 6 month ban as per
scenario B, the overall cost is estimated to amount to €1.2 billion.
Table 7.4: Estimated Short Run Impact of FMD Related Export Ban
– Value of Resulting Exports Reduction
Scenario
€ Billion
A: 3 month ban in all markets
0.9
B: 3 month ban in UK and EU markets/6 month ban in
rest of world
1.2
C: 6 month ban in all markets
1.8
D: 6 month ban in UK and EU markets/12 month ban
in rest of world
2.5
E: 12 month ban in all markets
3.6
F: 12 month ban in UK and EU markets/24 month ban
in rest of world
4.97
Source: Indecon calculations
7.17
Not surprisingly, the estimates in Table 7.4 suggest that the value of
lost exports increases with the duration of the export bans. Under the
worst case scenario, namely a one year ban in UK and other EU
markets, and a two year ban in non-EU markets, the total loss is
estimated at almost €5 billion, in the absence of interventions.
7.18
Table 7.5 gives an indication of the scale of these potential losses as a
percentage of GDP. In the best-case scenario, the estimates suggest a
fall in export earnings of 0.9 % of GDP. For scenario B, the overall cost
is estimated to amount to 1.2 % of GDP. Finally, in the worst-case
scenario, specifically a one-year ban in UK and other EU markets, and
a two-year ban in non-EU markets, the total loss is estimated at 4.8 %
of GDP. This is similar to the ban incurred by the UK.
Indecon
February 2002
94
Section 7
Impact of FMD in the Absence of Control Measures
Table 7.5: Estimated Short Run Impact of FMD Related Export Ban
– Value of Resulting Exports Reduction as a proportion of GDP
Scenario
% of GDP
A: 3 month ban in all markets
0.9%
B: 3 month ban in UK and EU markets/6 month ban in
rest of world
1.2%
C: 6 month ban in all markets
1.7%
D: 6 month ban in UK and EU markets/12 month ban
in rest of world
2.4%
E: 12 month ban in all markets
3.4%
F: 12 month ban in UK and EU markets/24 month ban
in rest of world
4.8%
Source: Indecon calculations
7.19
The estimates set out in Table 7.4 and Table 7.5 are gross estimates of
the impact on the economy of a range of possible scenarios. Crucially,
the estimates assume that the resources currently used in the agri-food
sector would not be put to use outside of this sector in the event of a
closure for a long period of time. In other words, it assumes, inter alia,
that the opportunity cost of labour is zero.
7.20
This is clearly an unrealistic assumption and tends to overstate the
potential losses. Given the low level of unemployment, laid off
workers would most likely find employment elsewhere which would
add to overall economic activity. This factor needs to be taken into
account when assessing the national economic impact of a widespread
FMD outbreak.
7.21
The magnitude of this factor is subject to considerable uncertainty,
however. For the purposes of this Study it has been decided to reduce
the gross estimates reported above by about 1/3. Adjusting for this
provides an estimate of the net impact of the counterfactual under
different scenarios. These are set out in Table 7.6 below and represent
a more realistic assessment of the impact on the national economy
assuming that redundant resources would be employed in other
sectors of the economy.
Indecon
February 2002
95
Section 7
Impact of FMD in the Absence of Control Measures
Table 7.6: Estimated Short Run Impact of FMD Related Export Ban
Assuming Alternative Use of Agriculture Resources
Scenario
€ Billion
% of GDP
A: 3 month ban in all markets
0.6
0.6%
B: 3 month ban in UK and EU markets/6
month ban in rest of world
0.8
0.8%
C: 6 month ban in all markets
1.1
1.1%
D: 6 month ban in UK and EU
markets/12 month ban in rest of world
1.7
1.6%
E: 12 month ban in all markets
2.4
2.3%
F: 12 month ban in UK and EU
markets/24 month ban in rest of world
3.3
3.2%
Source: Indecon calculations
Second-Round Effects
7.22
The fall in exports represents the first-round economic impacts of the
ban. The reduction would however also affect auxiliary services such
as the haulage sector and, crucially, reduce employment with knockon effects for the rest of the economy. Job losses would primarily
occur in four main sectors, namely:
-
Meat;
-
Dairy;
-
Other food products; and,
-
Drinks.
7.23
In estimating potential job losses, it is first necessary to estimate the
proportions of employment in each of these sectors that are exportrelated. The proportionate decrease in exports is then applied to the
export-related employment in each sector.
7.24
Table 7.7 presents the estimated number of job losses in each of these
four agriculture sub-sectors, for each scenario. The estimated number
of job losses ranges from 2,750 jobs for the best-case scenario to 15,200
for the worst-case scenario. Furthermore, the analysis suggests that
the majority of job losses are likely to be in the meat sector, with the
next highest percentage in the other foods sector.
Indecon
February 2002
96
Section 7
Impact of FMD in the Absence of Control Measures
Table 7.7: Estimated Employment Impact of Export Bans of
Different Durations on Different Sectors – Job Losses
Scenario
Meat
Dairy
Other
Foods
Drink
Total
A
1,931
176
515
134
2,756
B
2,425
286
847
240
3,798
C
3,862
352
1,030
269
5,512
D
4,851
572
1,694
480
7,596
E
7,725
704
2,059
537
11,025
F
9,701
1,144
3,388
959
15,192
Source: Indecon estimates
7.25
It should be noted that these estimates are exclusive of any
intervention, and should be considered as indicative static estimates.
One caveat concerns the issue of labour hoarding i.e. the likelihood
that employers retain employees in the event of a temporary economic
shock because of the costs associated with hiring and firing staff.
7.26
Table 7.8 presents re-estimates of the job losses discussed above
assuming different labour hoarding coefficients over different
scenarios. Specifically, labour hoarding is assumed to be negatively
related to the duration of an export ban. Hence for the purposes of
this analysis, the following assumptions are made:
7.27
-
80 % of labour is retained in scenarios A and B – this implies a
labour hoarding coefficient of 0.8;
-
50 % of labour is retained in scenarios C and D – this implies a
labour hoarding coefficient of 0.5; and,
-
20 % of labour is retained in scenarios E and F – this implies a
labour hoarding coefficient of 0.2.
According to the estimates presented in Table 7.8, total job losses in
the agriculture sector would range between a best-case scenario of 550
job losses to the worst-case scenario of 12,200. Again the majority of
job losses are estimated to be in the meat sector.
Indecon
February 2002
97
Section 7
Impact of FMD in the Absence of Control Measures
Table 7.8: Estimated Employment Impact of Export Bans of
Different Durations on Different Sectors – Job Losses Assuming
Labour Hoarding
Meat
Dairy
Other
Foods
Drink
Total
A
386
35
103
27
551
B
485
57
169
48
760
C
1,931
176
515
134
2,756
D
2,425
286
847
240
3,798
E
6,180
563
1,647
430
8,820
F
7,761
915
2,711
767
12,154
Scenario
Source: Indecon estimates
7.28
In addition, as exports fall imports would also be lower as in the Irish
economy a large proportion of inputs are imported. However, for the
agric-food sector most inputs are of course domestically produced.
This is confirmed by the available data. According to the CSO,
imported materials represented just 7.65 % of gross output in the
manufacture of food products, beverages, and tobacco sector. If the
manufacture of beverages (NACE code 159), and the manufacture of
tobacco products (NACE code 16) are excluded, this proportion
remains broadly the same. Hence, lower imports will only marginally
reduce the net economic impact of the reduction in exports.
7.29
Based on the above discussion the direct effects of the export ban
represent only part of the economic impact of a widespread FMD
outbreak. It is reasonable to add a further impact reflecting secondround effects. Once again we assume a multiplier equal to 1.7 in line
with international evidence to estimate these second round effects.
This adds a further €0.41 billion (best case scenario) to €2.32 billion
(worst case scenario) to the initial first round estimates.
Indecon
February 2002
98
Section 7
Impact of FMD in the Absence of Control Measures
Cost of Culling and Disposal
7.30
Next we must consider the costs of the culling and disposal of
animals, and the value of slaughtered livestock. The worst-case
scenario discussed above is broadly equivalent to the current UK
crisis. The outbreak in the UK led to the destruction of 6.6 % of their
livestock with the proportions varying by sector. The full details are
included in Table 7.9.
Table 7.9: Proportion of Livestock Slaughtered in UK in 2001
Total Stock (000s)
Slaughtered (000s)
Proportion
Cattle
11,339
594
5.2%
Sheep
43,291
3,310
7.7%
Pigs
6,523
142
2.2%
Total
61,153
4,046
6.6%
Source: Department for Environment, Food and Rural Affairs and Indecon
calculations
7.31
In terms of estimating the costs of culling and disposal of a
widespread FMD outbreak in Ireland, it is assumed that the same
proportion of the Irish stock as in the UK is destroyed as result of the
outbreak. Details of the Irish stock are included in Table 7.10, and
imply that 336,000 cattle, 395,000 sheep and 38,000 pigs would be
destroyed.
Table 7.10: Livestock Numbers - December 2000 (‘000)
Cattle (000s)
Sheep (000s)
Pigs (000s)
1999
6,707.6
5,392.2
1762.9
2000
6,459.3
5,130.3
1731.5
5.2 %
7.7%
2.2%
336
395
38
Destruction Rate
Assumed Animals
Destroyed
Source: CSO, Livestock Survey
Indecon
February 2002
99
Section 7
7.32
Impact of FMD in the Absence of Control Measures
To estimate the cost of culling and disposal, we assume that for each
case of FMD, 187 animals are slaughtered. Given the estimated cost
for disposal, cleaning, and valuation, we can estimate the overall costs
of culling and disposal. This is estimated at €13.1 million.
Table 7.11: Overall Costs of Culling and Disposal
Cases
Cost (€)
Total (€ millions)
Cattle
2,872
2,000
5,744
Sheep
3,376
2,000
6,752
325
2,000
650
Pigs
Overall
13,146
Source: Indecon analysis
7.33
We also need to model the value of the slaughtered animals, as per
Table 7.12. In total, it is estimated that the value of animals
slaughtered would equal €263.7 million.
Table 7.12: Value of Slaughtered Stock
Number
Value (€)
Total (€ million)
Cattle
336,000
635
213.4
Sheep
395,000
120
47.4
Pigs
38,000
76
2.9
Overall
263.7
Source: Indecon analysis
Indecon
February 2002
100
Section 7
Impact of FMD in the Absence of Control Measures
Interventions
7.34
The short-run costs of a widespread cull could be reduced if a
compensation or intervention scheme was introduced. Of course, this
would depend on how such a scheme would be funded. A scheme
entirely funded through the Irish Exchequer would not reduce the
overall cost of the cull to the national economy; it would involve a
transfer of resources from the non-farming economy to the farmers
affected.
7.35
The Government introduced such a scheme to compensate those
farmers in Louth whose herds were destroyed. However, such a
scheme would not be viable in the event of a major outbreak as the
cost would be prohibitive for the Exchequer.
7.36
However a scheme funded by the European Union would reduce the
national costs of the cull. In our assessment, based on the experience
to-date, an EU funded scheme if introduced would be insignificant
given the scale of the outbreaks considered here. It is felt that it is
highly unlikely that such a scheme could be viable in the event of a
widespread outbreak.
7.37
Accordingly, the costs estimated in this Study assume there is no
intervention. This assumption could be challenged but for the
purposes of this exercise it is believed to be reasonable.
Medium to Long Run Effects
7.38
The analysis to-date has focused on the short-un impact of a
widespread outbreak. There are also a number of potential longerterm effects.
7.39
Firstly, Ireland has a reputation as a producer of good quality food. A
widespread outbreak could damage Ireland’s reputation in export
markets even after the export bans have been removed. This could
damage future prospects in a number of markets that generate
significant export earnings. This effect is hard to quantify but is an
important consideration.
7.40
Secondly, the lost stock would affect the sectors for a number of years
as stocks are replenished. Evidence from the UK suggests that it
would be 2003/2004 before stocks levels start to return to previous
levels. This implies that export earnings may be below pre-FMD
levels for some time.
Indecon
February 2002
101
Section 7
7.41
Impact of FMD in the Absence of Control Measures
Finally, it could be argued that the reduction in Irish supply would
lead to higher prices on international markets. This depends on
whether Irish agriculture is considered to be a price-taker or whether
it has some market power. On balance, it is felt that some sectors are
significant players and that a reduction in Irish supply would lead to
higher prices. Once again, though, this is a marginal effect and is not
as important as the other medium to longer-term issues examined.
Tourism Sector and Other Sectors
7.42
This counterfactual has focused primarily on the agricultural sector.
There are however likely to be effects in the tourism and other sectors.
Table 7.13: Other Effects of a Full-Scale Outbreak of FMD in
Ireland
1.
Additional losses for the Tourism Sector
2.
Additional losses for other sectors of the economy
Source: Indecon
7.43
In the earlier part of the Study it was demonstrated that the Tourism
sector was severely affected by the FMD restrictions put in place. An
examination of the Government’s response suggests that the
restrictions introduced were exhaustive and it is unlikely that
additional measures would have been implemented in the event of a
widespread outbreak.
7.44
However, it is clear that these restrictions would have been in place
for a longer period and this would have extended the period during
which the tourism sector suffered a loss of business. Thus, it is
concluded that a widespread outbreak would also have been
damaging for the tourism sector. Also, the longer-lasting restrictions
would have affected the non-tourist-related elements of the domestic
economy such as sporting events etc.
7.45
Moreover, the tourism sector would have been affected by the
negative publicity surrounding the widespread culling and disposal
of animals. This would exacerbate the view that the countryside was
a no-go area.
7.46
It is concluded that a widespread outbreak would have led to further
losses for the tourism sector and other parts of the economy.
Indecon
February 2002
102
Section 7
Impact of FMD in the Absence of Control Measures
Conclusions
7.47
A widespread outbreak of FMD in Ireland would have significant
effects on the agriculture, tourism, and other sectors.
7.48
The effects for the agriculture sector include:
-
A ban on all exports of susceptible products to the EU;
-
A ban on all exports of susceptible products to non-EU
countries;
-
A comprehensive programme of culling and disposal of
animals;
-
A loss of stock and damage to Ireland’s reputation as a food
producer.
7.49
A widespread FMD outbreak is assumed to result in a complete
worldwide ban on livestock and meat exports, and a limited ban on
other agricultural products, including dairy products. Indicative
estimates suggest that in a best-case scenario of a worldwide 3 month
export ban, the reduction in exports would be equal to €0.9 billion. If,
however, non-EU markets imposed a longer 6 month ban, the overall
cost would amount to €1.2 billion.
7.50
An indication of the scale of these potential losses is given by the
losses as a percentage of GDP. If we assume that redundant resources
would be employed in other sectors of the economy, then in the bestcase scenario the estimates suggest a decrease of 0.6 % of GDP. In the
worst-case scenario, specifically a one-year ban in UK and other EU
markets, and a two-year ban in non-EU markets, the total loss is
estimated at 3.2 % of GDP.
7.51
In estimating potential job losses, it is first necessary to estimate the
proportions of employment in each of the main agriculture sectors
that are export-related. The proportionate decrease in exports is then
applied to the export-related employment in each sector. The
estimated number of job losses ranges from 550 jobs for the best-case
scenario to 12,200 for the worst-case scenario. Furthermore, the
analysis suggests that the majority of job losses are likely to be in the
meat sector. These estimates make plausible assumptions in relation
to labour hoarding.
7.52
The direct effects of an export ban represent only part of the economic
impact of a widespread FMD outbreak. It is reasonable to add a
further impact reflecting second-round effects. These are estimated to
add a further €0.4 billion (best case scenario) to €2.3 billion (worst case
scenario) to the initial first round estimates.
Indecon
February 2002
103
Section 7
Impact of FMD in the Absence of Control Measures
7.53
In terms of estimating the costs of culling and disposal of a
widespread FMD outbreak in Ireland, it is assumed that the same
proportion of the Irish stock as in the UK is destroyed as result of the
outbreak. This implies that 336,000 cattle, 395,000 sheep and 38,000
pigs would be destroyed. We estimate the overall costs of culling and
disposal at €13.1 million. Furthermore the value of the slaughtered
animals is estimated as €263.7 million.
7.54
Other medium to long run costs would also be incurred, including:
7.55
-
Damage to Ireland’s reputation as a producer of good quality
food;
-
Lost stock would take a number of years to replenish;
-
Reduced Irish supply could lead to higher prices on
international markets.
Finally, this counterfactual also identifies that there would be
significant impacts on the tourism and other sectors.
Indecon
February 2002
104
Section 8
Summary and Conclusions
8
Summary and Conclusions
8.1
The outbreak of Foot and Mouth Disease (FMD) in the early part of
2001 led to the introduction by the Irish Government of a range of
measures that had consequences for economic activity. A number of
sectors were affected, but primarily the agriculture and tourism
sectors.
8.2
This study has undertaken a detailed economic evaluation of the
effects of the FMD outbreak, and in particular:
8.3
•
Estimates the economic impacts of FMD and the control
measures introduced on the main sectors affected and on the
Exchequer; and
•
Provides an estimate of the likely economic impacts on these
sectors if the control measures had not been taken.
In examining the economic impact of FMD on the Irish economy, this
study has focused on three main areas:
-
Agriculture sector;
-
Tourism sector;
-
Exchequer costs.
Agriculture Sector
8.4
Overall, the available data suggest that the livestock sectors had a
good year in 2001 with strong growth in the pig and sheep sectors
offset somewhat by the BSE-related difficulties in the beef sector. On
the basis of our overall analysis, it is apparent that the FMD outbreak
did not have a significant impact on overall incomes in the main
livestock sectors that were most exposed. Detailed disaggregated
analyses were also undertaken for the pig, sheep, and cattle sectors.
8.5
The analysis of the pig sector in Ireland suggests that it benefited
marginally from the FMD outbreak. Total pig exports for the first
three quarters of the year were higher by €12 million. It is clear that
not all of the higher export values are due to FMD effects, however,
but it is our judgment that about 75 % of the increase can be attributed
to FMD consequences. This is equivalent to about €9 million for the
first three quarters of the year.
8.6
For the sheep sector, total exports in value terms increased primarily
due to higher prices and to a lesser extent higher exports to the UK.
These factors combined led to an increase in export values of around
€47.5 million for the first three quarters of the year.
Indecon
February 2002
105
Section 8
Summary and Conclusions
8.7
It is clear that part of the higher export values is due to higher prices
that are not exclusively related to FMD. If it assumed that 50 % of
these gains are attributable to FMD, this implies an increase to the
sheep sector of €23.7 million.
8.8
The analysis in chapter 4 suggests that the beef sector suffered another
difficult year in 2001. Exports to the EU and non-EU countries fell due
to the on-going effects of BSE. However the FMD situation in the UK
provided a minor boost to the sector. Exports to the UK increased by
€50 million and prices were also firmer than expected due to the
reduction in UK supply. In addition, higher UK exports reduced the
Exchequer cost of the PFD.
8.9
As with the pig and sheep sectors, it could be argued that the beef
sector indirectly benefited from the FMD outbreak in the UK. It is
estimated these benefits are in the region of €30 million for the Irish
economy.
8.10
On balance, it is felt that Irish agriculture actually benefited
marginally due to the FMD-related reduction in UK output. It is
estimated that export values were higher by about €63 million. Given
second effects, the best indicative estimate is that there were
agriculture-related benefits from FMD of around €107 million. These
are summarised in Table 8.1.
Table 8.1: Summary of Main Impacts of FMD on the Agriculture
Sectors in Ireland
Estimated Losses/Gains
•
Pig
•
Sheep
•
Beef
•
First Round Total
•
Second Round Impacts
•
Total
€ Million
9
23.7
30
62.7
44
106.75
Source: Indecon analysis
Indecon
February 2002
106
Section 8
Summary and Conclusions
Tourism Sector
8.11
FMD also had important consequences for the tourism sector. Firstly,
a number of sporting, business, and cultural events were cancelled,
and businesses and heritage centres closed, in response to the
restrictions imposed and this led to a reduction in the number of
overseas visitors. Furthermore, Government campaigns in Ireland
and the UK initially discouraged people from travelling behind the
two countries. This had a direct effect on the sector.
Transport
companies and hotels/guesthouses were adversely affected, in
addition to indirect effects on pubs and restaurants and key elements
of the services sectors.
8.12
Secondly, overseas tourist numbers were reduced by the negative
publicity surrounding the outbreak of FMD in the United Kingdom.
The widespread negative publicity associated with the culling led to
the perception that the UK countryside was off limits and this
perception also damaged the Irish market. Even in the absence of the
actual restrictions on activities, it is reasonable to assume that
Ireland’s tourist interests would have suffered.
8.13
In general terms, the economic effects of FMD for the tourism sector
include the following:
8.14
8.15
-
Direct income loss due to the decline in overseas visitors;
-
Indirect income loss due to the decline in overseas visitors;
-
Income effects arising from changes in domestic tourism
patterns;
-
Other domestic effects.
Table 8.2 presents estimates of the impacts of FMD in Ireland, with a
breakdown by:
•
Estimated losses for the overseas tourism market;
•
Estimated gains for the domestic tourist market; and,
•
Losses for other non-tourism and non-agriculture sector.
There are also likely to be second round impacts that account for the
impact of this loss of expenditure on other sectors of the economy.
Indecon
February 2002
107
Section 8
Summary and Conclusions
Table 8.2: Summary of Main Impacts of FMD on the Tourism
Industry and Other Sectors in Ireland
Estimated Tourism (Losses)/Gains
€ Million
•
Overseas visitor market
(97.3)
•
Domestic tourist market
9.2
•
Other Sectors
(25)
•
First round Total
(113.1)
•
Second round tourism impacts
(96.7)
•
Total
(209.8)
Source: Indecon analysis
8.16
Overall then, the total loss to the tourism sector as a result of FMD is
tentatively estimated to be in the region of €210 million for the first six
months of the year, with a heavy concentration in the rural economy.
Exchequer Costs
8.17
It is also necessary to assess the exchequer costs arising from the FMD
outbreak. These were identified in Chapter 4 and are set out again in
Table 8.3 for convenience.
Table 8.3: Exchequer Costs of FMD
1.
Cost of Time Spent by Departmental Officials
2.
Cost of Gardaí and Army Time
3.
Cost of Culling and Disposal
4.
Cost of the Compensation Package Provided
5.
Cost of Additional Tourism Promotion
6.
Impact on Tax Receipts
Source: Indecon
Indecon
February 2002
108
Section 8
Summary and Conclusions
8.18
The actual cost of imposing the various restrictions is the first cost to
be considered. As discussed previously, officials from a number of
Government Departments and agencies undertook a comprehensive
operation at the air and seaports. This led to direct costs in terms of
overtime payments and also to costs due to the work forgone during
the operations. Costs were also incurred during the culling of animals
in the Cooley Peninsula. Furthermore, in response to the FMD
outbreak, the State introduced a compensation scheme that was fully
funded by the Irish Exchequer.
8.19
The latest estimates from the Department of Agriculture, Food and
Rural Development suggest that expenditure by the Department in
relation to FMD amounted to €44.4 million. This includes payments
amounting to €10.1 million in relation to compensation, €16 million in
relation to general expenses, and staff costs (overtime, travel and
subsistence) of €18.3 million. These estimates exclude the cost of work
forgone during the FMD scare by Departmental officials.
8.20
In response to the crisis facing the tourism sector, there was an
additional allocation made to the budget for promoting Irish tourism.
This amounted to a cost of €12.7 million in the year 2001. We
understand that savings elsewhere in the tourism budget in part
funded this. Nevertheless, the full amount is accounted as a FMD
related Exchequer expenditure.
8.21
Finally, the Gardaí estimate that overtime amounted to €49.5 million.
8.22
Overall then in relation to the costs of imposing the restrictions and
compensation it is estimated that such exchequer costs amounted to
€106.6 million.
Overall Costs
8.23
A summary of the total estimated impact/costs of the FMD outbreak
and the restrictions imposed in Ireland is presented in Table 8.4.
Overall, costs are estimated at €209.6 million, or approximately 0.2 %
of GNP. These are indicative estimates and are subject to a number of
caveats as outlined.
Indecon
February 2002
109
Section 8
Summary and Conclusions
Table 8.4: Summary of Total Economy Costs of FMD
Estimated Gains and (Losses)
€ Million
•
Agriculture
•
Tourism and other Sectors
(209.8)
•
Exchequer Costs
(106.6)
•
Total
(209.6)
•
Total as % of GDP
106.7
0.2%
Source: Indecon analysis
Impact of FMD in the Absence of Control Measures
8.24
The second element of this Study involves estimating the likely
economic impacts on the main sectors of the Irish economy if control
measures had not been introduced. This requires specification of the
counterfactual of a widespread outbreak of FMD in Ireland.
Agriculture sector
8.25
8.26
A widespread outbreak would have a significant effect on the
agricultural sector. These effects include:
-
A ban on all exports of susceptible products to the EU;
-
A ban on all exports of susceptible products to non-EU
countries;
-
A comprehensive programme of culling and disposal
of animals;
-
A loss of stock and damage to Ireland’s reputation as a
food producer.
Indicative estimates suggest that in a best-case scenario of a
worldwide 3 month export ban, the reduction in exports would be
equal to €0.89 billion. If however non-EU markets imposed a longer 6
month ban, the overall cost would amount to €1.24 billion.
Indecon
February 2002
110
Section 8
Summary and Conclusions
8.27
An indication of the scale of these potential losses is given by the
losses as a percentage of GDP. If we assume however that redundant
resources would be employed in other sectors of the economy, then in
the best-case scenario the estimates suggest a decrease of 0.6 % of GDP
(or €0.6 billion). In the worst-case scenario, specifically a one-year ban
in UK and other EU markets, and a two-year ban in non-EU markets,
the total loss is estimated at 3.2 % of GDP (or €3.3 billion). Second
round effects are estimated to add a further €0.4 billion (best case
scenario) to €2.3 billion (worst case scenario) to these initial first round
estimates.
8.28
According to the estimates presented in this Report, total job losses in
the agriculture sector would range between a best-case scenario of 550
job losses to the worst-case scenario of 12,200. The majority of job
losses are estimated to be in the meat sector.
8.29
In terms of estimating the costs of culling and disposal of a
widespread in Ireland, it is assumed that the same proportion of the
Irish stock as in the UK is destroyed as result of the outbreak. This
implies that 336,000 Cattle, 395,000 sheep and 38,000 pigs would be
destroyed. The cost of culling and disposal these animals is estimated
at €13.1 million. Furthermore, the value of the slaughtered animals is
estimated at €263.7 million.
8.30
A number of potential longer-term effects were also considered.
Firstly, Ireland has a reputation as a producer of good quality food. A
widespread outbreak could damage Ireland’s reputation in export
markets even after the export bans have been removed. This could
damage future prospects in a number of markets that generate
significant export earnings. This effect is hard to quantify but is an
important consideration.
8.31
Secondly, the lost stock would affect the sectors for a number of years
as stocks are replenished. Evidence from the UK suggests that it
would be 2003/2004 before stocks levels start to return to previous
levels. This implies that export earnings may be below pre-FMD
levels for some time.
8.32
Finally, it could be argued that the reduction in Irish supply would
lead to higher prices on international markets. This depends on
whether Irish agriculture is considered to be a price-taker or whether
it has some market power. On balance, it is felt that some sectors are
significant players and that a reduction in Irish supply would lead to
higher prices. Once again, though, this is a marginal effect and is not
as important as the other medium to longer-term issues examined.
Indecon
February 2002
111
Section 8
Summary and Conclusions
Tourism and Other Sectors
8.33
The tourism sector was severely affected by the FMD restrictions put
in place and an examination of the Government’s response suggests
that the restrictions introduced were exhaustive. It is unlikely that
additional measures would have been implemented in the event of a
widespread outbreak.
8.34
However, it is clear that these restrictions would have been in place
for a longer period and this would have extended the period during
which the tourism sector suffered a loss of business. Thus, it is
concluded that a widespread outbreak would also have been
damaging for the tourism sector. Also, the longer-lasting restrictions
would have affected the non-tourist-related elements of the domestic
economy such as sporting events etc.
8.35
Moreover, the tourism sector would have been affected by the
negative publicity surrounding the widespread culling and disposal
of animals. This would exacerbate the view that the countryside was
a no-go area.
8.36
It is concluded that a widespread outbreak would have led to further
losses for the Tourism sector and other part of the economy.
Overall Impact of FMD in the Absence of Control Measures
8.37
In the event of a widespread outbreak of FMD, overall GDP would be
reduced by between 0.96 % (€1 billion) and 5.4 % (€5.6 billion) through
the impact on the agriculture sector. A widespread outbreak would
also have significant negative implications for the tourism sector and
for non-tourist-related elements of the domestic economy such as
sporting events etc.
Indecon
February 2002
112
Annex 1
Annex 1 Additional Agriculture Data
A.1.1 Annex 1 presents additional data which informed our analysis in
chapter 4. The following data are presented in this Annex:
-
The year-on-year changes in the price of prime cattle;
-
Monthly changes in prime cattle prices;
-
The year-on-year changes in the price of cows for slaughter;
-
Monthly changes in cow slaughter prices;
-
The year-on-year changes in the price of store cattle;
-
Monthly changes in store cattle prices; and,
-
Trends in the Purchase for Destruction scheme for 2001.
Indecon
February 2002
113
Annex 1
Table A1.1: Year-on-Year Changes in the Price of Prime Cattle- 2001/2000
2000
2001
%Change
Jan
81
90.8
12.1%
Feb
84.2
84.6
0.5%
Mar
87.1
86.5
-0.7%
Apr
89.1
87.2
-2.1%
May
93.8
85.6
-8.7%
June
95.1
86.2
-9.4%
July
93.4
82.3
-11.9%
Aug
93.7
79.1
-15.6%
Sep
92.2
80.6
-12.6%
Oct
91.8
Nov
87.2
Dec
83.9
Source: CSO.
Table A1.2: Monthly Changes in Prime Cattle Prices
2001
Monthly Changes
Jan
92
Feb
84.5
-8.2%
Mar
81.6
-3.4%
Apr
84.1
3.1%
May
81.3
-3.3%
June
83.5
2.7%
July
81.7
-2.2%
Aug
79.6
-2.6%
Sep
82.2
3.3%
Source: CSO.
Indecon
February 2002
114
Annex 1
Table A1.3: Year-on-Year Changes in the Price of Cows for Slaughter 2001/2000
2000
2001
% Change
Jan
58.7
62.4
6.3%
Feb
64.4
67.2
4.3%
Mar
69.3
67.9
-2.0%
Apr
75.2
70.3
-6.5%
May
78.5
69
-12.1%
June
88.6
67.6
-23.7%
July
89.9
68.4
-23.9%
Aug
87.9
68.8
-21.7%
Sep
86.3
62.5
-27.6%
Oct
81.2
Nov
73.6
Dec
61.5
Source: CSO.
Table A1.4: Monthly Changes in Cow Slaughter Prices
2001
Monthly Changes
Jan
70.7
Feb
71.2
0.7%
Mar
68.4
-3.9%
Apr
68.3
-0.1%
May
65.7
-3.8%
June
61.4
-6.5%
July
63.5
3.4%
Aug
63.9
0.6%
Sep
59.6
-6.7%
Source: CSO.
Indecon
February 2002
115
Annex 1
Table A1.5: Year-on-Year Changes in the Price of Store Cattle- 2001/2000
2000
2001
% Change
Jan
80.2
96.2
20.0%
Feb
84.9
88.8
4.6%
Mar
89.1
90.8
1.9%
Apr
90.4
91.5
1.2%
May
96.2
89.8
-6.7%
June
97.8
90.4
-7.6%
July
96.8
87.6
-9.5%
Aug
96.8
83.5
-13.7%
Sep
95.2
84.3
-11.4%
Oct
94.7
Nov
89.6
Dec
87.5
Source: CSO.
Table A1.6: Monthly Changes in Store Cattle Prices
2001
Monthly Changes
Jan
98.8
Feb
87.9
-11.0%
Mar
85.3
-3.0%
Apr
86.9
1.9%
May
84.5
-2.8%
June
86.2
2.0%
July
86.2
0.0%
Aug
84.1
-2.4%
Sep
98.8
3.3%
Source: CSO.
Indecon
February 2002
116
Annex 1
Table A1.7: Trends in Purchase for Destruction Scheme - 2001
Totals
Monthly changes
Week 1
0
Week 2
4158
Week 3
11816
184.2%
Week 4
10888
-7.9%
Week 5
14570
33.8%
Week 6
18850
29.4%
Week 7
19867
5.4%
Week 8
20149
1.4%
Week 9
18437
-8.5%
Week 10
16180
-12.2%
Week 11
14511
-10.3%
Week 12
9771
-32.7%
Week 13
10066
3.0%
Week 14
11080
10.1%
Week 15
9059
-18.2%
Week 16
9064
0.1%
Week 17
10975
21.1%
Week 18
8750
-20.3%
Week 19
7657
-12.5%
Week 20
6719
-12.3%
Week 21
6368
-5.2%
Week 22
5961
-6.4%
Week 23
5823
-2.3%
Week 24
9100
56.3%
Week 25
9134
0.4%
Week 26
9072
-0.7%
Source: Department of Agriculture, Food and Rural Development.
Indecon
February 2002
117
Annex 2
Annex 2 Additional Tourism Data - Visitor
Numbers
A.2.1 Indecon has also accessed data on overseas visitor numbers from Bord
Failte, which provides estimates of visitor numbers for the months
from June to December of 2001.
A.2.2 Table A2.1 presents Bord Failte data on the number of overseas
visitors to Ireland in 2001, for different monthly periods.
Unsurprisingly, the largest number of visitors to Ireland came in the
summer months of June to August, though the forecasted visitor
numbers from October to December are also high at 1.1 million
visitors.
Table A2.1: Overseas Visitor Numbers (000s) - 2001
Jan-Feb
Mar-May
Jun-Aug
Sep
Oct-Dec
(F)
Total
Britain
390
773
1,103
334
727
3,327
Mainland
Europe
122
313
552
126
234
1,347
North
America
79
234
370
85
147
915
Other
28
63
94
29
37
251
Total
619
1,383
2,119
574
1,145
5,840
Source: Bord Failte data.
A.2.3 Table A2.2 presents analogous overseas visitor numbers for 2000.
Again the greatest number of visitors is in the months from June to
August, though it should be noted that visitor numbers are higher in
each period in 2000 compared to the relevant periods in 2001. This
confirms the findings of the analysis earlier in the Report.
Indecon
February 2002
118
Annex 2
Table A2.2: Overseas Visitor Numbers (000s) - 2000
Jan-Feb
Mar-May
Jun-Aug
Sep
Oct-Dec
(F)
Total
Britain
411
892
1,122
327
742
3,494
Mainland
Europe
108
307
643
133
260
1,451
North
America
81
242
412
127
196
1,058
Other
24
56
95
33
56
264
Total
624
1,497
2,272
620
1,254
6,266
Source: Bord Failte data.
A.2.4 Table A2.3 presents the percentage change in visitor numbers, and
shows clearly that visitor numbers are higher in each period of 2000
compared to the corresponding periods in 2001.
Table A2.3: Overseas Visitor Numbers - Percentage Change from 2000 to
2001
Jan-Feb
Mar-May
Jun-Aug
Sep
Oct-Dec
(F)
Total
Britain
-5.1%
-13.3%
-1.7%
2.1%
-2.0%
-4.8%
Mainland
Europe
13.0%
2.0%
-14.2%
-5.3%
-10.0%
-7.2%
North
America
-2.5%
-3.3%
-10.2%
-33.1%
-25.0%
-13.5%
Other
16.7%
12.5%
-1.1%
-12.1%
-33.9%
-4.9%
Total
-0.8%
-7.6%
-6.7%
-7.4%
-8.7%
-6.8%
Source: Bord Failte data.
Indecon
February 2002
119
Annex 2
A.2.5 Bord Failte have also derived separate estimates for North America
since North American business evolved somewhat differently to other
markets. Table A2.4 presents the alternative scenario for North
America.
Table A2.4: North American Data
Jan-Feb
Mar-May
Jun-Aug
Sep
Oct-Dec
(F)
Total
2000
81
141
513
127
196
1058
2001
79
145
459
85
147
915
-2.5%
2.8%
-10.5%
-33.1%
-25.0%
-13.5%
Percentage
Change
Source: Bord Failte data.
Indecon
February 2002
120
Annex 3
Annex 3 Deriving Expenditure Per Visitor
Data
A.3.1 This Annex derives the evolution of data in relation to expenditure
per visitor. Initially, Table A3.1 presents data on the number of
tourists visiting Ireland from 1996 to 2000, by area of residence.
Table A3.1: Tourism Numbers by Area of Residence - 1996-2000 (000s)
1996
1997
1998
1999
2000
Britain
2,590
2,850
3,199
3,430
3,498
Mainland
Europe
1,177
1,168
1,255
1,321
1,451
North
America
729
777
858
950
1,059
Rest of World
187
213
221
243
264
Total
Overseas
4,682
5,007
5,534
5,934
6,273
Northern
Ireland
607
580
530
460
483
Total Out-ofState
5,289
5,587
6,064
6,403
6,756
Domestic
Trips
6,170
6,850
6,934
7,285
6,556
Source: Bord Failte, Tourism Facts 2000.
A.3.2 Table A3.1 shows that as of 2000, the total number of overseas visitors
to Ireland was 6.3 million with the majority (3.5 million) visiting from
Britain. Furthermore there were 483,000 visits from Northern Ireland
to the South giving total out-of-State visits of almost 6.8 million. Bord
Failte estimates the number of domestic trips within the State in 2000
at 6.6 million. Table A3.1 also shows the evolution of these visitor
numbers over the period from 1996 to 2000.
Indecon
February 2002
121
Annex 3
A.3.3 Table A3.2 presents the total tourism revenues generated by area of
visitor residence, again quoting Bord Failte data. As Table A3.2
shows, total overseas tourism revenues as of 2000 were equal to €2.7
billion, with a further €123 million generated from visits from
Northern Ireland. Estimates of earnings from domestic trips are
estimated at €1.1 billion, implying total tourism revenues of over
IR£3.1 billion. It should be noted however that this figure excludes
carrier receipts of €797 million in 2000, which would imply an overall
tourism intake in 2000 of almost €4.7 billion.
Table A3.2: Tourism Revenues by Area of Residence - 1996-2000 (€m)
1996
1997
1998
1999
2000
Britain
729
867
962
1,012
1,119
Mainland
Europe
592
581
593
631
736
North
America
402
442
488
555
707
Rest of World
119
127
131
145
182
Total
Overseas
1,842
2,017
2,174
2,343
2,744
Northern
Ireland
108
129
122
115
123
1,950
2,146
2,296
2,457
2,867
735
852
954
1,116
1,092
Total Out-ofState
Domestic
Trips
Source: Bord Failte, Tourism Facts 2000.
Indecon
February 2002
122
Annex 3
A.3.4
Given visitor numbers and revenues by market, it is
straightforward to estimate expenditures per visitor by market, as
per Table A3.3.
Table A3.3: Expenditure per Tourist by Place of Residence 1996-2000 (€)
1996
1997
1998
1999
2000
Britain
281.4
304.2
300.7
295.0
320.0
Mainland
Europe
503.3
497.6
472.7
477.3
507.0
North
America
551.4
569.0
568.8
584.3
667.8
Rest of World
636.9
594.4
591.8
597.3
688.2
Total
Overseas
393.5
402.9
392.9
394.8
437.4
Northern
Ireland
177.8
223.1
230.7
249.5
255.0
Total Out-ofState
368.7
384.2
378.6
383.8
424.3
Domestic
Trips
119.1
124.3
137.5
153.3
166.6
Source: Indecon calculations from data from Bord Failte, Tourism Facts 2000.
Indecon
February 2002
123
Annex 4
Annex 4 Regional Distribution of Overseas
Visitors
A.4.1 This Annex presents data on the regional distribution of overseas
visitors to Ireland. Table A4.1 presents a percentage breakdown of
regional visits. It should be noted that percentages do not necessarily
sum to 100, as visitors may stay in more than one region during a trip.
Table A4.1: Regional Distribution of Overseas Visitors (%)
January - September
1997
1998
1999
2000
2001
Regions Visited (at least one night) %
Dublin
51
53
54
55
55
Midlands/East
16
16
16
14
13
South East
19
18
16
19
17
South West
33
29
29
31
27
Shannon
22
21
21
20
20
West
24
21
21
23
21
North West
10
10
9
9
7
4,024
4,433
4,759
5,013
4,686
Total Overseas
Visitors (000s)
Source: Bord Failte.
A.5.1
Table A4.2 presents data on the number of visits to each region.
Again the sum of regional visits does not sum to the overall total
number of visits since visitors can stay in more than one region.
Indecon
February 2002
124
Annex 4
Table A4.2: Regional Distribution of Overseas Visitors (000s)
January - September
1997
1998
1999
2000
2001
Regions Visited (at least one night) (000s)
Dublin
2,052
2,349
2,570
2,757
2,577
Midlands/East
644
709
761
702
609
South East
765
798
761
952
797
South West
1,328
1,286
1,380
1,554
1,265
Shannon
885
931
999
1,003
937
West
966
931
999
1,153
984
North West
402
443
428
451
328
4,024
4,433
4,759
5,013
4,686
Total Overseas
Visitors (000s)
Source: Bord Failte.
Indecon
February 2002
125