Top UK business leaders have welcomed Tory plans to bring back tax-free shopping for overseas visitors if they reenter government in a bid to end the tourism shopping slump.
The Conservatives said it would restore VAT refunds for eligible visitors from outside the EU after the tax-break was stripped away in 2021 under former chancellor Rishi Sunak.
Since abolishing tax-free shopping the UK has lost ground as a major European shopping destination, losing shoppers to cities including Paris and Milan.
Real visitor expenditure has dropped 8.7 per cent since 2021, while average spending has declined from £848 to £786, according to the latest analysis from the Centre for Economics and Business Research (Cebr).
Kemi Badenoch, leader of the Conservative party, said: “British retailers are closing down shops with the knock-on effects damaging small manufacturers, suppliers and jobs across the UK.
“Why should we send shoppers away to France or Italy? This attitude that we’re just helping wealthy tourists is ignorant of the reality that they bring much-needed income.”
Funding the plans
The Treasury previously estimated that ending tax-free shopping would save the government roughly £540m a year.
The Conservatives plan to offset the cost of reintroducing tax-free shopping through a ‘crackdown’ on unpaid NHS tourism.
This includes more consistent charging of patients ineligible for free treatment, minimum recovery targets for debts and requiring full repayment of debts before visa applications or renewals will be considered.
Analysis from Cebr suggests fully restoring the scheme could attract up to 2.3m additional visitors, generating £4.1bn in extra spending. The think tank also estimated that every £1 of VAT refunded to tourists could create up to £1.5 in other taxes.
Business leaders and retail bosses have welcomed the Tories pledge to restore tax-free shopping, claiming the move will help drive economic growth and boost employment.
Executives from across retail and hospitality backed the plans, including the chief executives of Kurt Geiger, Fortnum & Mason and Charles Tyrwhitt.
Brian Duffy, chief executive of Watches of Switzerland, said: “Finally, a political leader supporting a change that could deliver real benefits for growth, employment and the Exchequer.
“Restoring tax-free shopping would help make the UK more competitive as a global destination for luxury retail and tourism, supporting investment and jobs while bringing additional spending into our towns and cities.”
Helen Dickinson, chief executive of the British Retail Consortium added that removing the tax break put the UK at a “clear disadvantage”, and attracting more overseas spending would support “jobs and investment” across the country.
Courting disgruntled businesses
The move comes as the Conservatives work to court businesses who have become crippled by Labour’s business tax raid.
Retailers have urged Andy Burnham’s government to back the high street by cutting business rates and to tackle youth unemployment by slashing employment costs.
Hospitality firms have also increased pressure on Labour to slash VAT, with the 20 per cent rate the second-highest in Europe, in order to give the industry a boost.
Business owners also recently hit back at Labour’s decision to roll out a holiday tax across mayoral authorities under their control, arguing it increases the cost of a domestic holiday.
