We’ve not heard so much about the problem of the withdrawal of tax-free shopping perks for tourists in Britain lately, with retailer attention having turned to the impending rise in National Insurance contributions. But the issue hasn’t gone away as a key body made clear on Friday.
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The New West End Company, which represents businesses in the famous retail area, said the lack of tax-free shopping cost the West End £640 million in 2024 and the festive season showed only “muted” growth.
That figure is based on estimates of what international visitors didn’t spend in the district last year and was bigger than the £400 million lost in 2023.
West End retailers saw only 0.25% year-on-year growth during November and December, which is way short of even the lower inflation figure we’ve been seeing in recent months.
That divided into spending by UK residents being down 2.2%, “reflecting ongoing domestic economic pressures”, while international spend rose 3.5%. That latter figure is well below what might have been expected had tax-free shopping been available and NWEC also said that December itself saw a dip in international spend.
The 3.5% uplift also failed to take international visitor spend back to the level it was at pre-pandemic and before tax-free shopping was withdrawn due to Brexit, despite visitor numbers actually being higher.
It added that the muted festive growth “highlights the importance of realising untapped opportunities in the international visitor economy”.
The body’s CEO Dee Corsi called for the “urgent reintroduction of tax-free shopping as a growth-driving measure, to support retail, leisure and hospitality sectors”.
It’s hard to argue with NWEC’s belief that a reintroduction of tax-free shopping would spur spending if we look at the buoyant spending London used to see from tourists, as well as the spending rises being seen in Paris and Milan and the large number of visitors still coming to the UK.
In continental Europe, where tourists enjoy up to 20% savings on purchases, data from Global Blue has shown that issued sales in-tore in Europe surged by 16% in November and 20% in December. Compared to the previous year, “the UK is significantly behind this”.
Not that tourists have ceased spending altogether and they remain a crucial source of revenue for West End fashion and beauty retailers.
But the all-important Chinese tourists for whom the West End was a must-visit in the last decade weren’t in the group of top-spending tourists. In fact, visitors from the US, Saudi Arabia, and Germany emerged as the top international shoppers last year.
Dee Corsi added that while the UK Government has just announced support for Heathrow’s third runway, “policies like lack of tax-free shopping remain stumbling blocks in their growth agenda. We need bold action to unlock the full potential of international spend, if we are to recover to pre-pandemic levels and achieve growth”.
