West End businesses say ‘tourist tax’ has damaged their trade

Warnings over Britain’s tourist tax as 90% of West End businesses say the end of VAT-free shopping for international visitors has damaged their trade as foreign travellers spend less

  • Businesses are considering cutting investment amid dwindling visitor footfall

Nine in ten businesses in London’s West End say they have been damaged by the scrapping of tax-free shopping for tourists.

Companies in the nation’s premier shopping hub say they are considering slashing investment in the UK after seeing foreign visitors’ footfall and spending fall.

Holidaymakers are shunning Britain’s capital to spend their money in rival cities such as Paris and Lisbon due to the ‘tourist tax’, business leaders warn.

MPs are set to debate the levy in Parliament this afternoon following the Daily Mail’s ‘Scrap the Tourist Tax’ campaign.

Around 100 members of the New West End Company, which represents businesses, were asked about Rishi Sunak’s decision to end the tax-free shopping scheme for tourists in 2021. One in five (21 per cent) said they were considering making closures in the UK or instead investing in other countries such as France and Italy.

Companies in London's West End say they are considering cutting investment, amid lower visitor footfall as tourists choose other European cities to avoid Britain's 'tourist tax'

British fashion label Mulberry closed its Bond Street store earlier this year, citing a ‘dramatic’ drop in footfall after the levy was introduced. Of those affected by the tourist tax, almost three-quarters (72 per cent) reported a fall in the overall numbers of visitors.

This suggests the UK is being held back from the post-pandemic travel boom that many of its rivals in Europe are enjoying. Nine in ten also said they had seen international tourists spend less cash in their venues.

Dozens of MPs and peers have backed the Mail’s campaign, and a 90-minute Westminster Hall debate is set to be held on the issue today. This means the Treasury will have to formally respond to the campaign, launched by hotelier Sir Rocco Forte and backed by more than 350 prominent firms, including Burberry, Harrods and Marks & Spencer.

We are cutting off our nose to spite our face

By Sir Geoffrey Clifton-Brown

This week’s belated heatwave may seem like a strange time to be thinking about Christmas. But that’s exactly what Britain’s beleaguered hospitality and retail sectors are doing while the rest of the UK basks in long-overdue late summer sunshine.

The festive season, of course, provides an annual economic boost for business as well as a welcome fillip for the Exchequer. But we’re missing out by billions of pounds a year of potential growth because of the Treasury’s short-sighted decision to abolish tax-free shopping for overseas tourists.

That’s why I’ve called a Parliamentary debate in which I will today ask the Treasury to commission a wide-ranging study into the economic impact of this misguided tax on tourists.

As the Daily Mail has pointed out in its hard-hitting ‘Scrap the Tourist Tax’ campaign, the Chancellor’s decision to end VAT-free shopping for tourists almost three years ago now was based on a simple calculation that it would save the Government £2billion a year in lost revenues. 

But I believe the Treasury’s sums were based on flawed assumptions and failed to take into account the bigger economic picture – that shopping can be an important driver of international tourism and tourists do more than spend on luxury goods.

The Treasury’s sums were based on flawed assumptions and failed to take into account the bigger economic picture, writes Sir Geoffrey Clifton-Brown MP

They stay in hotels and spend money in pubs and restaurants, as well as on visits to museums, theatres, concerts and sporting events. 

In fact, the Treasury’s decision to effectively make Britain 20 per cent more expensive for tourists has had an immediate negative effect. Big-spending shoppers from America, China and the Middle East have chosen to shop elsewhere.

While London’s tourist spend has flatlined, the capital’s biggest rivals – New York, Paris, Milan and Madrid – have seen their tourist spends double or even triple.

We really are cutting off our nose to spite our face. Studies by Oxford Economics and the CEBR suggest that abolishing the tourist tax will contribute up to £9.1billion to the economy. Far from costing the Treasury £2billion a year, it would generate additional tax revenues of £350 million a year.

Despite this week’s baking weather, a Treasury U-turn would come too late to boost our tourist economy for the summer season. But abolishing the tourist tax in one of the hottest weeks of the year would be one of the best Christmas presents Britain could possibly have.


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