By Marco Passoni
Are we about to finally see the end of the UK’s damaging Tourist Tax? As China’s high-spending shoppers begin to make a return to the world stage with growing outbound travel during the Lunar New Year, business leaders met at Heathrow Airport to launch a new campaign demanding that the British government end its foolish decision to scrap VAT-free shopping in the country.
To me it is amazing that we have waited this long for a coming together of major stakeholders to tackle this issue. There have been open letters and a protest by business leaders, but the fact that there has not been a joined-up and concerted effort on this before is frankly amazing.
There can be no doubt that the Tourist Tax has done great damage to the UK’s finances and the country’s standing as a retail centre on the global stage. The headline figures are well-known to us all. From the Association of International Retail’s report that the move has cost £6.5 billion in lost sales and £200 million in revenue, to CEBR showing that it has cost the country £11 billion and 2 million visitors, this has been a terrible decision which should never have stood for this long.
There can be no doubt that the Tourist Tax has done great damage to the UK’s finances and the country’s standing as a retail centre on the global stage.
There have been direct impacts felt in the travel retail sector too, a market which was not supposed to be the focus of the policy. Heathrow Airport has reported that sales in the first nine months of 2023 were down 37% on before the pandemic as recovery was hit.
But long-term impacts remain. Even if the government does listen to reason and change its policy this spring, it will be too late to encourage the return of big-spending and long-distance travellers who will have already made their plans. The swell of Chinese travel during the recent Lunar New Year showed that market will potentially bring some spend back into the region, and the UK is putting itself at a disadvantage. It is already happening. Numbers from VAT refund businesses show that spend by international travellers in Europe is at 50% of pre-pandemic levels. France has recovered to 2019 numbers, while Italy is at 65%. American and Chinese shoppers have already begun to avoid London, preferring Paris or Milan, with 55% of US traveller spend in Europe during last year’s Black Friday holiday taking place in Paris. The UK is falling behind, and only a swift turnaround coupled with active action to promote the country as a shopping haven will help with.
Data from ticket suppliers and firms such as Global Blue in the last year underlined that shopping is a key deciding factor for travellers and the UK has made itself less attractive with key markets in the Middle East, Americas and Asia by scrapping tax-free shopping.
Those at the Heathrow meeting are correct when they say that scrapping the policy will “turbocharge” the UK’s economy and appeal. However, just reversing the policy will not be enough. Positive steps are needed too.
Data from ticket suppliers and firms such as Global Blue in the last year underlined that shopping is a key deciding factor for travellers and the UK has made itself less attractive with key markets in the Middle East, Americas and Asia by scrapping tax-free shopping
We should all be actively getting involved with our colleagues, peers and government representatives to push this forward. The figures cannot be denied, and we must ensure that our sentiments cannot either. This government has shown it cannot be relied on to get these decisions right, so we must guide them.
Once this policy is put away, it will need a focused effort to repair the damage to the UK’s image.
British Chambers of Commerce Director-General, Shevaun Haviland said: “The Chancellor in his Spring Budget has the chance to firmly show that Britain is open for business, he must seize it.”
He is right, but he is not alone, this is a battle and an opportunity which we must all fight for and seize.
