Amid a rise in international visitors, London retailers are facing a £220 million loss due to the removal of tax-free shopping for tourists.
- The previous Conservative government’s policy change is leading to competitive disadvantages for UK retailers compared to their European counterparts.
- Retail and tourism sectors are urging the UK government to reintroduce tax-free shopping to stimulate economic growth.
- Despite a 3% increase in visitors, spending has decreased by 12% compared to pre-pandemic levels, highlighting the policy’s impact.
- Reinstatement of tax-free shopping is seen as crucial for revitalising London’s position as a leading shopping destination.
Amidst a rise in international visitor numbers, London retailers are grappling with a significant financial loss of £220 million, attributed to the removal of tax-free shopping for tourists. This decision, introduced by the previous Conservative government under Jeremy Hunt, was intended to fortify public finances but has resulted in a competitive setback for UK retailers. In contrast, European Union countries offer VAT refunds on eligible tourist purchases, attracting more spending from international visitors.
Dee Corsi, Chief Executive of the New West End Company, highlighted the extensive implications of the ‘tourist tax,’ emphasising its adverse effects not just on retail but across the broader tourism ecosystem. “The loss of £400 million in unrealised sales last year in the West End alone is just a small part of this story,” Corsi stated, noting that reduced sales impact not only shops but also local restaurants and hotels.
This financial data has come to light as Chancellor Rachel Reeves plans her inaugural budget, faced with difficult decisions on tax increases and expenditure reductions. The Labour party has announced no plans to reinstate tax-free shopping, focusing instead on revenue generation without raising major taxes like income tax, VAT, or national insurance.
The New West End Company, representing a vast array of retailers and leisure businesses in renowned shopping districts, estimates losses by analysing airport arrival data against international spending patterns in the area. These figures are compared to 2019 benchmarks when tax-free shopping was available, during which £500 million in discounts were processed, enhancing the appeal of London as a top shopping destination.
Although visitor numbers have rebounded, spending has taken a hit with a 12% decline, as opposed to a 36% increase in overseas spending within the EU. This scenario underscores the urgent calls from UK retailers for policy revisions to regain competitive standing. Without such measures, the UK’s allure as a premier shopping location may wane, posing notable economic challenges for both London and the broader UK economy.
Reinstating tax-free shopping is seen as essential to restoring London’s competitive edge in the international retail market.
