Tourist spending down by third as wealthy overseas visitors shun UK over shopping tax

Wealthy overseas shoppers are shunning Britain as a result of a ‘tourist tax’ imposed by Rishi Sunak when he was Chancellor, latest figures have revealed.

Following the now Prime Minister’s decision in 2020 to scrap VAT-free purchases for tourists – which allows them to claim back 20 per cent of the price of goods – they are instead flocking to other European cities.

It means that tourist spending in Britain has reached only two-thirds of its pre-pandemic level, according to research by Global Blue, a company that specialises in providing VAT refunds.

Italy and Spain are much closer to seeing a return to 2019 levels of tourist spending, while in France they are already spending more.

Paul Barnes, head of the Association of International Retail (AIR), said other cities would be ‘rubbing their hands with glee’ over the figures. American and Middle Eastern tourists in particular have returned to rival cities – more than doubling the amount they spend in Paris. But in the UK, spending by US visitors has only recently reached pre-Covid levels.

Travellers from countries such as the United Arab Emirates are spending a third less here than they were before the pandemic.

Tourists can buy VAT-free goods in the UK but only if they have them delivered to an address overseas.

Mr Barnes said: ‘People who used to come to the UK from the US and the Gulf are shunning Britain. Maybe they are coming to look around, but they are not spending their money here. So, the Treasury is damaging our productivity.’

A Global Blue survey of 10,000 Chinese people who had visited Europe for tax-free shopping in 2019 revealed that the UK is now the least popular major European destination.

A spokesman for Value Retail, the owner of designer outlet shopping centre Bicester Village in Oxfordshire, which is popular with Chinese tourists, said: ‘Other countries with a more competitive tax system have been benefiting from increased tourist spending at this country’s expense.’

Harrods boss Michael Ward said the UK’s hotels and restaurants are also missing out on tourists’ cash.

Chancellor Jeremy Hunt claimed the decision to scrap VAT-free purchases will be worth £2 billion a year. A Treasury spokesman said: ‘Tax- free shopping is still available for all non-UK visitors who purchase items in store and have them sent directly to their overseas address.’