APART from the big question about how far the financial markets are going to fall – and how much damage it will do – many of us have been concerned with another important matter this summer. Do we holiday in this country or go abroad?

It is, on the face of it, a straightforward cost-benefit calculation. Take your holiday here and you run the gauntlet of appalling weather, flooding, pestilence (foot and mouth), UK transport and variable service. There is also a sense that you never quite get away from it all.

On the other hand, there is a good chance it will cost you less, allow you to avoid the horrors of Britain’s airports, explore our green and pleasant land and provide a welcome glow of smugness about reducing our contribution to global warming. Even the weather is not a one-way street. Some people I know have been happy to come back to the rain after experiencing heatwaves elsewhere.

We have, too, an example from the very top, Gordon Brown declaring there was no better place in the world to take a holiday than Britain, having given up on Cape Cod a few years ago, although his break in Dorset lasted a mere four hours before he decided he needed to rush back and run the country. I joined him, not literally, but in deciding to holiday at home.

Our holiday choices have a significant impact. Foreign visitors to Britain spent just over £16 billion last year, up a healthy 12.3% on 2005. The amount spent by UK visitors overseas increased by a smaller amount, 7%, but from a larger base, to give a figure of £34.4 billion.

The UK’s tourism trade deficit was thus more than £18 billion, compared with £4.5 billion in 1997. You might say that more people have felt the need to get away under Labour, although you could just as easily attribute it to rising prosperity under this government.

In real terms, the deterioration has been somewhat less, but still significant. A quarter of a century ago Britain had a balance-of-payments surplus on tourism, as well as on manufacturing. Now we appear to have an intractable deficit on both.

Whatever the cause, Britain has a tourism deficit with North America, £750m, a much heftier one with Europe, £12.7 billion, and a sizeable one with the rest of the world, £5.9 billion. We have, it should be said, a big tourism surplus with Germany, £271m – something has to make up for all those BMWs and Mercedes – and with Sweden, Norway, Nigeria, Russia, Japan, Denmark, Saudi Arabia and a few other countries, including, interestingly, Iran. Mostly, though, Britons spend more in other countries, than their citizens spend here.

Could this be beginning to change? Tom Wright spent part of his career getting the Saga generation onto cruise ships, and thus probably not doing much for Britain’s tourism deficit. He was also with Center Parcs. Now he is in charge of VisitBritain, the body responsible for getting foreigners to come here, and persuading Britons to holiday at home.

He thinks there are straws in the wind that suggest the tourism trade deficit can be stabilised, even reduced. One is that holidaying in Britain is in danger of becoming fashionable. For years, since the days of Judith Chalmers, TV has encouraged us to travel the world. It still does. But now it is balancing the usual holiday shows with a clutch of series that celebrate Britain, including Coast, Mountain and Britain’s Favourite View.

Second, it is just possible that people are responding to the exhortation to be more green. A YouGov poll for this newspaper earlier this month found that most people claimed to have changed their lifestyle in some way. For some, 17%, it meant travelling less by plane. This could go a lot further, particularly if future green taxes were to increase the cost of overseas travel.

Third, while the quality of the British weather cannot be said to have improved, the quality of holiday accommodation has. There are still Basil Fawltys around, but not as many as there used to be.

Fourth, the 2012 Olympics are regarded by the tourist industry as a once-in-a-generation opportunity to boost visits to Britain. Off the back of the games, many other events and conferences – most unrelated to sport – have been secured for Britain, providing a “halo” effect that boosts tourism.

Beijing, for example, has seen many more visitors in the run-up to next year’s Olympics. Barcelona and Sydney also saw big effects.

Though it reflects a period before the onset of this summer’s grim weather, the recent news on Britain’s tourism balance has been quite encouraging. In the 12 months to the end of June, visits abroad by UK residents increased by 2%, rising from 68.1m to 69.5m, according to the Office for National Statistics. The biggest growth area was in trips to parts of the world other than Europe and North America, up 9% to 10m.

On the other side of the ledger, visits by overseas residents to Britain rose 8%, increasing from 30.8m to 33.2m. There was an 8% increase in those coming from the rest of Europe, a 5% rise from North America (despite the weak dollar) and an 11% surge from the rest of the world.

The tourism economy is worth about £85 billion a year. A closing of Britain’s tourist deficit would have a significant economic impact, eliminating nearly half the current-account deficit at a stroke.

Will it happen? Those whose job it is to boost numbers have high hopes for India, China and central and eastern Europe. Indian tourists to Britain are on the point of overtaking those from Japan. China’s middle classes may be a rich source and Poland’s numbers are up – and not just the plumbers and builders, but tourists.

In the end, though, it matters just as much that British people change their holiday patterns.

Foreigners might think of this summer’s weather as merely quaint. We may be less forgiving this coming winter when we’ll be booking our next holidays.

PS In turbulent times there’s no substitute for a good book, not least to tell you just how bad it could get. The late JK Galbraith’s account of 1929 and all that, The Great Crash, has always sold well and is doing so now. Charles Kindleberger’s Manias, Panics and Crashes: a History of Financial Crises, is rightly regarded as a classic.

Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay, written in the 19th century, confirms that there is nothing new about craziness in markets. Edward Chancellor’s Devil Take the Hindmost: a History of Financial Speculation, is a more recent account.

In terms of specific episodes, When Genius Failed: The Rise and Fall of Long-Term Capital Management, by Roger Lowenstein, does what it says about the LTCM crisis of 1998, which some compare with the current episode. Inventing Money: the Story of Long-Term Capital Management and the Legends Behind It, is Nicholas Dunbar’s version.

More generally, Infectious Greed by Frank Partnoy, is about derivatives and the underpricing of risk, the source of the current crisis. Hot off the presses is Nassim Nicholas Taleb’s The Black Swan: the Impact of the Highly Improbable. Whether this month’s crisis is a black-swan event or whether the sub-prime fallout was entirely predictable is a matter of legitimate debate.

david.smith@sunday-times.co.uk

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