Britain’s economy is facing a £2.8billion shortfall in tourist spending, with the Government being urged to bring back tax-free shopping for overseas visitors.
When inflation is factored in, spending will be 8 per cent lower than it was in 2019, according to tourism body VisitBritain.
This £2.8billion hole could be plugged if the Treasury scrapped the hated ‘tourist tax’, a new report from the Centre for Economics and Business Research claims.
Their research shows that a fully-utilised tax-free spending scheme could boost tourist expenditure by £3.9billion per year as it would encourage more holidaymakers.
Those who come on shopping trips also splash out on hotels, restaurants and theatre tickets.
Research shows that a fully-utilised tax-free spending scheme could boost tourist expenditure by £3.9billion per year as it would encourage more holidaymakers (file image)
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Chancellor Rachel Reeves says she wants to become the most ‘pro-growth Chancellor’ in British history
But Britain’s inbound tourism industry will not recover to pre-Covid levels this year amid fears the country is falling behind rivals such as France and Italy.
Bosses of businesses including Mulberry, Marks & Spencer and Selfridges have said reinstating tax-free shopping could turbo-charge the economy.
Chancellor Rachel Reeves says she wants to become the most ‘pro-growth Chancellor’ in British history.
In 2021, then-Chancellor Rishi Sunak abolished tax-free shopping for international visitors.
The tax means shoppers pay 20 per cent more for goods in the UK than in neighbouring countries in Europe.
The Mail has been campaigning for the policy to be reversed.
The Conservatives refused to heed the calls from business to ditch the tax.
Wonks at the CEBR also argue reintroducing the scheme would bring a net benefit to the Treasury coffers, as the forgone tax revenues would be ‘more than offset’ by higher returns on other taxes.
‘This represents a relatively low-hanging fruit for a new administration facing a tough public finance environment,’ the report added.
There is also a shortfall in the numbers of overseas tourists visiting the UK, with 38.7million expected by the end of the year.
![Bosses of businesses including Mulberry, Marks & Spencer (pictured) and Selfridges have said reinstating tax-free shopping could turbo-charge the economy](https://i.dailymail.co.uk/1s/2024/08/20/01/88705253-13759525-image-m-19_1724112184373.jpg)
Bosses of businesses including Mulberry, Marks & Spencer (pictured) and Selfridges have said reinstating tax-free shopping could turbo-charge the economy
This would still be a 5 per cent gap compared to the 40.9 million who visited in 2019.
The Tories asked the Office for Budget Responsibility to assess the tax ahead of the Spring Budget, but ultimately kept it.
The Mail on Sunday understands that Labour does not support ditching the levy.
Firms want the party at a minimum to pledge to launch a formal assessment.
Hotelier Sir Rocco Forte, who spearheaded a protest backed by more than 500 bosses, said keeping it would make ‘a complete mockery’ of Labour’s growth promises.
Businesses have already started lobbying the Labour government, elected last month, to change the policy.
They are awaiting Labour’s first fiscal event, the Autumn Budget on October 30.
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