Key facts
- Selfridges has called for the return of VAT-free shopping to help revive British high streets.
- The UK government abolished tax-free shopping for international tourists in January 2021.
- Restoring tax-free shopping could generate £4.1 billion in additional spending and attract 2.35 million extra visitors annually, according to the Centre for Economics and Business Research (CEBR).
- CEBR estimates that every £1 of VAT refunded could generate a further £1.56 in other tax revenue.
- The UK Conservative Party has pledged to restore VAT refunds for overseas visitors.
- Selfridges reported sales falling to £774.6 million in the 48 weeks leading to January 4.
Selfridges has urged the UK government to reinstate VAT-free shopping for overseas visitors, stating it is essential for revitalizing Britain's high streets. The department store chain claims the abolition of the tax-free scheme in January 2021 has deterred high-spending tourists, contributing to a 7% drop in its own sales over the past year.
The UK Conservative Party has pledged to reintroduce VAT refunds for international shoppers, aiming to attract tourists back to the country. The Centre for Economics and Business Research (CEBR) estimates that restoring tax-free shopping could generate £4.1 billion in additional spending, attract 2.35 million more visitors annually, and support over 150,000 jobs. The CEBR also projects that every £1 of VAT refunded could generate an additional £1.56 in other tax revenue, with the estimated £540 million annual cost partly offset by measures against "NHS tourism."
Data indicates that real visitor expenditure in 2024 was 8.7% lower than pre-pandemic levels, with average spending per visit falling from £848 to £786. London's West End has reportedly suffered a £310 million revenue loss in the first half of the year due to the absence of tax-free shopping, with affluent visitors from the Middle East showing particularly large declines. Retailers are reportedly reconsidering staffing and investment plans, with over 80% stating the lack of tax-free shopping has damaged their trading performance. Selfridges itself is planning to reduce its global workforce by approximately 2%, or about 70 jobs, linking this decision to the decline in international sales.
Industry insiders note that wealthy shoppers, especially those seeking luxury goods, are shifting their spending to European cities like Paris, Milan, and Madrid, where tax-free shopping remains available. This has contributed to a 36% increase in international spending across continental Europe since 2019. Business leaders, including Sir Rocco Forte, chairman of Rocco Forte Hotels, have backed the campaign to reverse the policy, arguing that the UK is at a competitive disadvantage compared to other major European shopping destinations.