Published
Apr 26, 2023
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Most wealthy tourists spend less in London since end of VAT refunds - report

Published
Apr 26, 2023

Retailer frustration over the impact of the end of VAT-free shopping for tourists in Britain continues to mount and on Wednesday a key body representing them put some stark figures on that impact.


Photo: Pexels/Public domain



The New West End Company (NWEC) — which represents businesses in one of the key shopping areas of London — said that almost 71% of international visitors to London are spending less due to the tax change. 

The proportion of West End spending that comes from international visitors has fallen sharply. And we can't simply blame the pandemic hangover, because tourist shopping in many destination cities in Europe has recovered much more strongly.

NWEC and 67 other leading business figures from across the UK have written a letter to the Chancellor of the Exchequer asking him to reconsider the decision to axe the perk. 

And that 71% of visitors who are holding back isn’t the worst of it because the figure rises to 93% of the highest spenders. They all claim they’d buy more on their trips to the UK if the VAT Retail Export Scheme (VAT RES) was still in operation. 

The West End used to account for 65% of tax free shopping, which in turn supported a thriving retail, hospitality and leisure economy. Today, the proportion of West End spending from international visitors has fallen from 57% in 2019 to 44%.

The scheme was withdrawn by the Treasury as Britain exited the EU. That was despite earlier hopes that it would be extended to EU tourists, potentially making Britain the most attractive shopping destination across Europe. 

But instead, it ended during lockdown on 31 December 2020, which meant visitors from non-EU countries were no longer able to recover the VAT on purchases that they took home with them in their luggage. 

NWEC said the loss of the scheme “effectively added a 20% premium to goods such as shoes and watches, putting London at a disadvantage to destinations such as Paris and Madrid where visitors from the US, China and Gulf Cooperation Council (GCC) countries continue to enjoy equivalent schemes”.

Dee Corsi, chief executive of NWEC, added: “The harmful impact of this tourist tax is being amplified as international visitors return in greater numbers. Forcing international visitors to pay 20% more in London is causing spend to be diverted to Paris and Milan, undermining not just retail but hotel and leisure spending, which in turn is putting thousands of jobs at risk.

“US flights to London are up by 37% against 2019, yet spend is up just 4%. The same pattern is seen with visitors from GCC countries. Flights are up 13% but spend is down 1%. When we speak to international visitors, nearly three quarters of them would spend more here if they could claim back VAT. It’s high time for the Chancellor to back Britain, by bringing back tax-free.”

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