Key facts
- UK businesses are urging ministers to restore VAT-free shopping for foreign tourists.
- The policy would allow tourists to reclaim 20% VAT on purchases.
- Businesses argue that reinstating tax-free shopping would create at least 73,000 new jobs.
- The Association of International Retail (AIR) estimates a £3.7 billion boost to the economy.
- The UK is currently the only major European country without tax-free shopping for non-EU visitors.
- Luxury exports to the EU were 43% lower than they might have been without Brexit, according to Walpole.
UK businesses are urging the government to reinstate tax-free shopping for overseas visitors, a policy that would allow tourists to reclaim 20% VAT on their purchases. The scheme was ended in 2021, and businesses argue its absence is harming the retail sector and the wider economy.
Industry leaders, including those from luxury fashion, beauty, and hospitality, have written to Chancellor Rachel Reeves, stating that the UK's lack of a tax-free shopping scheme makes it less competitive than European cities like Paris and Milan. They contend that wealthy US consumers, in particular, are choosing to shop abroad to avoid tariffs and take advantage of rebate schemes.
Research from Walpole, the industry body for British luxury fashion businesses, indicates that luxury exports to the EU have been significantly impacted by Brexit, with fashion and accessories firms seeing sales 64% lower. The report suggests that strong links with Europe are essential for the sector's projected growth to £125 billion by 2028.
The Association of International Retail (AIR) estimates that restoring VAT-free shopping could deliver a £3.7 billion boost to the economy and create at least 73,000 new jobs. They argue that the UK could offer 20% rebates to 450 million EU consumers, in addition to those from the rest of the world, potentially making London a global shopping capital. Visitor spending in the UK has not recovered to pre-pandemic levels as strongly as in Spain and France, with some British shoppers also buying items on trips to the EU to claim VAT refunds.