For decades, international shoppers coming to the UK were able to reclaim VAT on retail purchases. This was a major driver of tourism, an essential industry for our country, which supports 3.8 million jobs. Visit Britain estimates shopping accounted for 25% of all international visitor spending – more than any other single item, including accommodation, dining or travel. For every £1 spent in VATfree shopping, around £4 was spent on goods and services on which VAT was charged. The UK’s tax rebates for tourists were in line with most other major economies. VAT is designed as a destination-based consumption tax.
Any tax due should be paid where goods are ultimately consumed, not where they were bought. All EU counties offer tax-free shopping for this reason. In 2021, however, the last government abruptly scrapped these tax rebates as ministers sought budget savings. Little thought seemed to have been given to whether the Exchequer would lose out overall. Sadly, it is now clear that international visitors are increasingly being driven into the arms of the UK’s rivals due to the absence of VAT rebates here.
New figures show that in the UK, our post-Covid tourism recovery has been weaker than elsewhere in Europe. The figures on tourist spending are stark: last year in the UK, it stood 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 claim a VAT refund.
This Government, however, has promised to pull every lever available for growth and we stand at a crossroads. A historic Brexit advantage – a golden opportunity to transform the UK into Europe’s global shopping capital – lies unrealised.
Ministers must act now: restore tax-free shopping for all international visitors – EU and non‑EU – and unleash an economic boost worth billions. Brexit has granted us a unique right: to offer VAT refunds to the 450 million EU consumers, plus the rest of the world. Other European countries happily offer refunds only to non‑EU visitors – but we can go further.
The Association of International Retail, which I chair, has just submitted a case for reform to the Department for Culture, Media and Sport. It outlines the potential impact: reinstating tax-free shopping would deliver a £3.65billion uplift in retail spending from EU visitors alone – and an additional £1.5 billion from the rest of the world.
This isn’t just about a few luxury retailers in London. It’s about regional jobs and every link in the supply chain. Based on British Retail Consortium statistics, one job is created for every £50,000 of retail spend. AIR forecasts at least 73,000 new jobs across the UK if tax-free shopping returns.
The benefits will be nationwide, with half of EU visitor spending occurring outside the capital and through regional airports. The call for change is now deafening.
More than 500 businesses – from Burberry, Primark, Marks & Spencer, Boodles, Claridge’s, Mulberry, Heathrow, John Lewis, Fortnum & Mason to smaller names like Pragnell, Chapel Down and Essential Edinburgh – are urging Chancellor Rachel Reeves to reverse the mistake of the previous government.
With Britain no longer in the EU, we have the opportunity to become the best place in the world for shopping. While the 26 EU countries offer VAT-free shopping to non-EU visitors, including those from the UK, Britain is now in the unique position of being the only major European country where this attraction could also be offered to all 450 million EU residents.
Britain would have an unchallengeable competitive advantage within Europe. Britain would also have the opportunity to create a whole new, shopping-led, EU tourism market. These would be additional visitors, spending additional money in hotels, restaurants, and on travel, culture and entertainment, all of which generate additional VAT for the Exchequer.
We’re ready to work with ministers to introduce a new, fiscally positive scheme for international visitors to support economic growth throughout the UK. So here’s the message to the Treasury: reinstate tax-free shopping now.
Reinstate it for tourists from all nations. Let Britain once again become the shopping destination to beat. It’s not just common sense. It’s an economic necessity.
