Ministers are being urged to seize a major Brexit benefit worth £3.7 billion a year by reintroducing tax-free shopping for international visitors. Business leaders say the move would make Britain the “the global shopping capital” and create tens of thousands of jobs.
It is hoped the reversal will be announced when Chancellor Rachel Reeves delivers her highly anticipated Budget in the Autumn. The VAT retail export scheme allowed international shoppers to recover 20% VAT on high street purchases. But it was scrapped in 2021 after Britain left the EU.
The Association of International Retail (AIR) says that reintroducing tax-free shopping for international visitors would benefit every region in the UK.
In a letter to ministers the group says that tapping into the european visitors market alone would help create at least 73,000 new jobs.
They argue that as well as retailers the entire tourist economy has been affected.
Those that have called for a new tax-free shopping scheme include Primark, Marks & Spencer, Heathrow and John Lewis.
The AIR submission, made to the Department for Culture, Media and Sport (DCMS), says a new tax-free scheme is a “unique opportunity for Britain to generate economic growth across the whole country” and “build on Britain’s successful and fast-growing tourism sector”.
The document warns that international visitors are increasingly being driven into the arms of the UK’s rivals thanks to the absence of VAT rebates.
It cites new figures showing that in the UK, the post-Covid tourism recovery has been weaker here than elsewhere in Europe.
In the UK, visitor numbers had recovered to 96% of their 2019 levels last year, compared to 101.9% in Spain and 100% in France.
The figures on tourist spending are even more stark with spending in the UK last year at 92% of 2019 levels compared to 106% in Spain and 110% in France.
Increasingly, British shoppers are also shunning homegrown outlets and buying items on trips to the EU, where they can now claim a VAT refund.
Visit Britain estimates that shopping accounts for 25% of all international visitor spending, more than any other single item, including accommodation, dining or travel.
For every £1 spent in VAT-free shopping, around £4 was spent on goods and services on which VAT was charged.
Derrick Hardman, chair of AIR, said: “With Britain no longer in the EU, we have the opportunity to become the best place in the world for shopping.”
Rishi Sunak ended the tax break when he was Chancellor four years ago.
Kwasi Kwarteng announced he was reintroducing it in his ill-fated mini-Budget in 2022 but Jeremy Hunt reversed the decision a month later when he took over the job.
Prominent Conservative Party supporter Sir Rocco Forte, chairman of Rocco Forte Hotels, said: “It is clear that retail and other trades have suffered hugely thanks to the end of tax-free shopping under the last government.
“Restoring tax-free shopping also represents a significant Brexit opportunity as the UK would be able to offer savings to a new market of 450 million EU consumers, thanks to our place outside the EU.”
DCMS has been contacted for a comment.