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Axing tax-free shopping for overseas visitors in the UK is an “act of economic self harm,” a tourism trade body warned on Monday, as new figures showed that visitor numbers at the country’s popular attractions had yet to reach pre-pandemic levels.
Bernard Donoghue, chief executive of the Association of Leading Visitor Attractions, said the government’s decision to scrap VAT-free sales for tourists in 2021 made the UK “less competitive and less attractive as a destination”, and there was an urgent need to reinstate the scheme and extend it to EU visitors.
“Getting rid of tax-free shopping for overseas visitors is an act of economic self-harm,” Donoghue said, adding that tourists were shortening their stays in the UK in order to enjoy shopping in Paris, Milan, Rome or Madrid instead.
His criticism comes as the association published new figures showing that Britain’s tourist sites have failed to rebound since the Covid pandemic. They show that a total of 146.6mn visits were made last year to the country’s 374 best-known tourist attractions, up 19 per cent from 2022 but still a decline of 11 per cent from 2019.
While the number of visitors from the US has picked up quickly, Donoghue said the UK was yet to witness “the full return” of European and Chinese tourists.
Moreover, while the recovery in visitor numbers to the UK last year relative to 2019 was on a par with other western European countries, its market share is expected to fall compared with rival destinations by 2028, according to the tourist board VisitBritain, which cited forecasts by Oxford Economics.
UK visitor numbers are predicted to have increased by just 19 per cent on pre-pandemic levels by 2028, compared to 26 per cent in western Europe, VisitBritain said.
Patricia Yates, chief executive of VisitBritain said that the loss of market share was “due to underperformance from intra-European travel”, which she said was partly because EU travellers “used to be able to travel to the UK using just their ID card but they are now required to use a passport”.
To boost the country’s attractiveness to tourists, the hospitality, travel and retail industries have called on the government to bring back tax-free shopping for international visitors. The UK is currently the only major European country not to offer the scheme.
Businesses say that making EU residents eligible for tax free shopping could also help the tourism sector. Before Brexit, only shoppers from non-EU countries were able to claim VAT refunds. The government decided to scrap the entire scheme after leaving the bloc rather than expanding it to EU visitors, arguing it was “a costly system to maintain”.
Former chancellor Kwasi Kwarteng said he would reintroduce the scheme in his 2022 “mini” Budget, but his successor Jeremy Hunt reversed the pledge.
While Hunt promised in his November autumn statement to “look again at the numbers”, including the cost of lost VAT, he did not mention policy in his spring Budget this month.
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