London’s stores count cost of ‘tourist tax’

Retailers in the West End of London suffered a £220 million loss in unrealised sales in the first half of this year after the scrapping of the UK’s tax-free shopping for tourists, research has found.

Despite a rising number of international visitors to the capital in 2024, the New West End Company said the area’s retailers were on course to suffer a bigger financial hit this year than the estimated £400 million in unrealised sales in 2023.

The previous Conservative government scrapped tax-free shopping for overseas visitors under plans by Jeremy Hunt when he was chancellor to repair the public finances. The retail industry has called for the tax exemption to be reinstated, claiming that it puts Britain at a competitive disadvantage to the European Union, whose 27 member countries provide VAT refunds on purchases above a certain threshold.

Dee Corsi says the tourist tax is affecting “our entire tourism ecosystem”

Dee Corsi, chief executive of the New West End Company, said the tourist tax was having a “knock-on impact on our entire 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. Fewer sales on the shop floor means fewer tourists in restaurants and hotels. If the government is serious about returning the country to growth, tax-free shopping presents a rare, golden opportunity to do so.”

The figures come as Rachel Reeves is preparing her first budget for the end of next month. The chancellor has warned of “tough decisions” on tax rises and spending cuts necessary to repair the public finances. Labour has said that it will not reinstate tax-free shopping for tourists as it tries to generate more revenues for the exchequer without raising income tax, VAT or national insurance.

The New West End Company represents 600 retailers, hotels and restaurants in London’s visitor-heavy areas of Bond Street, Oxford Street, Regent Street and Mayfair. The estimate for unrealised losses is calculated using data on passenger arrivals at London’s airports against payment numbers for international transactions in the West End. The estimate is based on comparisons with 2019, when tax-free shopping was still available before the pandemic and about £500 million in discounts were processed, according to the Office for Budget Responsibility.

The industry body said overall visitor numbers to the capital had risen by 3 per cent in the first half of the year, compared with the same period in 2019, but spending was said to have fallen by 12 per cent. This compares with a rise of 36 per cent in overseas spending in the EU.

“The New West End Company is calling on the government to reinstate the policy without delay and to return British businesses to a level playing field with their European counterparts,” the association said.