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London Fears Attacks' Impact on Tourism

Retailers and tourism officials already digesting the fallout from the first deadly bombings in the British capital two weeks ago warned Friday that the second round of attempted attacks on Thursday had severely dampened the prospects of a prompt rebound in both sectors.

As armed police stormed a subway train in pursuit of a suspected terrorist, shooting him dead, the country's Tourism Industry Emergency Response (search) group met for the second time in as many weeks and concluded that the effects would be significant.

Several tourists in the city Friday took the stoic approach, saying they had made little change to their itineraries other than opting to avoid public transportation as much as possible.

"I nearly didn't come here, but it's unlikely they (terrorists) will do it two days in row," said New Zealand tourist Mitchel Beckett, 25, as he strolled around the central Covent Garden (search) shopping and theater district.

While most tourists already here are making the most of their vacations, the industry is more concerned about the effect of the bombings two weeks ago and the attempted attacks Thursday on those who are still to plan their trips.

Analysts had hoped the negative impacts on the tourism and retail industries from the first explosions that killed 56 people would have a relatively short-term effect on visitors.

The World Travel & Tourism Council Crisis Committee (search) has predicted that U.K. visitor arrivals in 2005 might decline by approximately 588,000 from the previously forecast 30.95 million, but expected the ill-effects of the July 7 bombings to have dissipated by 2007.

That was before bombers attempted to set off another four devices on Thursday. The bombs did not detonate and there were no fatalities, but they left the city shaken.

"I think the most sensitive nature of the economy is going to be tourism," said Philip Shaw, U.K. chief economist at Investec Bank. "I think it's fair to say that tourists will be put off London."

The Tourism Industry Emergency Response group, which includes tourism organization VisitBritain, the government's Culture Department, British Airways and the Association of British Travel Agents, said spending by overseas visitors is likely to be 300 million pounds ($526 million) less than industry expectations factoring in just the July 7 bombings.

VisitBritain spokesman Elliott Frisby said that after the first attacks, there was a small number of cancellations or postponement of trips, with most inquiries about the logistics of traveling.

More cancellations or decisions not to travel will eat into a tourism industry that contributes 4 percent to Britain's total gross domestic product of $2.1 trillion. London accounts for around 50 percent of foreign tourism alone and provides a gateway for people traveling to other areas.

"Yesterday's events are going to have a serious impact on tourism," Frisby said. "I think it's going to become a lot more serious for the industry."

Retailers are also counting the rising costs as several subway lines remain out of action and police investigations continue, causing fears of a further slide to an already stagnating British economy.

Research group SPSL, which tracks the number of shoppers in the city, said that 27 percent fewer shoppers entered central London on Thursday compared with a year ago. SPSL had previously forecast that there was a 77 percent drop in the number of shoppers in central London on the day of the first bombings.

"The most fundamental question we must now ask is whether shoppers will no longer consider the July 7 attacks as a one-off event but as part of an ongoing threat," said SPSL spokesman Tim Denison. "If they do, then it is likely that consumer recovery will be very much slower as a result."

The retail sector has been closely watched as a key indicator for the economy, with concerns about slowing spending as major stores have reported poor sales since the end of last year. Official retail sales figures showed an improvement in June, but economists say they are likely a blip as sales growth on a quarterly basis is at its lowest level in more than six years.

Government statistics out Friday showed that gross domestic product expanded 0.4 percent in the second quarter of 2005, the same rate as the previous three months, as spending slowed and the manufacturing sector fell into recession.

The year-on-year growth figure of 1.7 percent was the weakest performance since the first quarter of 1993 and economists said it greatly increases the chances of a cut in interest rates by the Bank of England next month.

"Against this disturbing background, confidence is weak, and the bank should not hesitate to cut interest rates at its next meeting in August to prevent a further deterioration in the economic situation," said David Kern, economic adviser for the British Chambers of Commerce. "It is critically important for the government to do everything possible to sustain business confidence."