The removal of tax-free shopping for tourists has led to significant financial losses for West End retailers, according to recent research.
- International visitors to London increased by 3% in the first half of 2024, yet there was a 12% decrease in spending in the West End compared to 2019.
- The abolition of VAT-free shopping is identified as a major factor negatively impacting related sectors such as hospitality and cultural tourism.
- Tax-free refunds in European destinations grew by 36%, highlighting a shift in tourist spending towards the Continent.
- The call for legislative change coincides with the upcoming Budget, offering a potential opportunity to restore the UK’s appeal to international shoppers.
New research has highlighted a substantial financial impact on retailers in London’s West End due to the withdrawal of tax-free shopping for tourists. An estimated £220 million in potential sales was lost in the first half of 2024 alone, with projections for the entire year suggesting a total loss of £400 million.
Despite a 3% rise in international visitor numbers to London during the first half of 2024, spending in popular areas like Oxford Street, Bond Street, Regent Street, and Mayfair saw a decline of nearly 12% when contrasted with the same period in 2019. The previous availability of VAT-free shopping was a significant lure for international shoppers, now removed, it appears to have influenced tourist spending behaviour significantly.
The New West End Company, representing over 600 businesses in the area, attributes this downturn largely to the cessation of tax-free shopping incentives. This policy shift has not only reduced retail sales but has also had a knock-on effect on the broader tourism ecosystem. Restaurants, hotels, and cultural attractions have all been indirectly affected, as fewer international shoppers contribute to their revenue.
Across Europe, the introduction of tax-free shopping has led to a 36% increase in refund claims in the first half of 2024, compared to the same timeframe in 2019. This marks a notable pivot of international shoppers from the UK to the Continent, where such incentives remain in place.
Dee Corsi, CEO of the New West End Company, suggested that the upcoming Budget presents an opportunity for the government to consider reintroducing tax-free shopping. She stated, “The upcoming Budget is Labour’s first chance to deliver on its election promises and prove it is the party of business.” Corsi advocates for a strategic approach to economic growth, including the reform of business rates, innovation encouragement, and public safety improvements alongside the reinstatement of tax-free shopping.
Reinstating tax-free shopping could potentially re-establish the UK’s competitiveness in attracting international tourists and their spending.
