Retailers in London’s West End missed out on £640 million in sales last year due to the removal of tax-free shopping for international visitors, according to new research.
Figures from the New West End Company, which represents businesses in the district, reveal that the revenue lost from tourist spending increased from £400 million in 2023, highlighting the ongoing impact of the government’s policy change.
Analysts noted that while spending by UK consumers at West End retailers fell by 2.2 per cent during the key November-December festive trading period, international visitor spending rose by 3.5 per cent. The boost was largely driven by strong demand from German, American, and Saudi Arabian tourists.
The West End Company cited data from Global Blue, a tax-free shopping advisory firm, which showed that in-store sales in Europe surged by 16 per cent in November and 20 per cent in December. Unlike the UK, most European countries offer tourists up to 20 per cent tax relief on purchases, incentivising higher spending and giving the Continent a competitive edge over London.
The Conservative government scrapped tax-free shopping for international visitors in January 2021, arguing at the time that the decision would not have “any significant economic impacts.” However, the latest figures suggest the opposite, with West End businesses warning that London is losing out to rival shopping destinations in Paris, Milan, and Madrid.
“With international spend still below pre-pandemic levels, the UK’s lack of a robust tourism strategy and the removal of VAT-free shopping put London at a competitive disadvantage against key European cities, stifling recovery and growth,” the West End Company stated.
They added that while domestic consumer spending remains under pressure, international visitors represent an untapped opportunity for economic growth. “In the face of continued pressure on domestic spend, the policy environment must evolve quickly to support business stability and meaningful growth.”
Despite weak consumer spending over the past two years, recent data from the British Retail Consortium and KPMG suggests a potential turnaround, with retail sales rising by 2.6 per cent in January – the biggest increase in nearly two years. Separate research from Barclays found that spending on non-essential goods climbed by 2.7 per cent, with strong demand for health and beauty products.
Dee Corsi, chief executive of the New West End Company, warned that economic uncertainty and a lack of government action continue to hamper growth. “Challenging economic headwinds and policy inertia are holding us back. International visitors are eager to spend at a time when domestic spend is declining, but without a robust tourism strategy, we are losing out to our European competitors.”
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Tax-free shopping cut costs London’s West End £640m in lost sales