London losing out due to ‘tourist tax’ as US and Gulf visitors opt for Paris and Milan instead
London is losing out on wealthy foreign visitors splashing their cash in Oxford Street due to the so-called ‘tourist tax’, amid renewed calls to scrap it and make the capital more competitive.
The removal of VAT free shopping for international tourists continues to hurt London retailers, with visitors from the US and the Gulf cutting spending by one per cent and 17 per cent, respectively, new figures show.
Data published by the New West End Company showed the drop off in spending in the three months to June came despite flights from this region to London rising more that it did pre-Covid.
Flight bookings from American and the Gulf rose by 17 per cent and 7 per cent against the second quarter of 2019, the study showed.
The government ditched the VAT refund for tourists in 2021, when Prime Minister Rishi Sunak was Chancellor – a move that has since been dubbed ‘the tourist tax’.
Prominent retail bodies, including the head of Mulberry and boss of Heathrow, have called for the reinstatement of the tax amid growing fears that UK businesses are losing out to European rivals where the tax is still in place.
The study showed today that spending by American visitors grew by 183 per cent in France and by 174 per cent in Spain and visitors from the Gulf spent 118 per cent extra in France and 112 per cent more in Italy.
“It’s plain to see that more tourists are becoming aware of the tax-free shopping issue and choosing to spend their money in European cities other than London,” Dee Corsi, chief executive of New West End Company, said.
“While it’s reassuring that our capital city hasn’t lost its appeal when it comes to attracting overseas visitors, the widening gap between footfall and spend in Q2 should set alarm bells ringing in Westminster.”
She added: “For West End businesses, this is a particularly acute issue as international visitors make up a significant proportion of all retail and leisure sales. The most recent data indicates a worsening trend of lower spending from international visitors, as word gets out that Britain no longer has tax-free shopping.
“I was in Italy this weekend and the amount of American tourists that were shopping was very visible and the UK is not getting anywhere near its fair share of that,” Duffy said.
MPs are set to debate the policy in parliament in September.