Four prominent trade bodies have urged Chancellor Rachel Reeves to reconsider the abolition of tax-free shopping for international tourists, a policy that was scrapped in January 2021. Their joint letter highlights the significant challenges facing British retailers and the broader economy amidst a global downturn and specific issues stemming from US tariffs. The representatives of the British Retail Consortium, the British Beauty Council, Walpole, and the British Fashion Council expressed concerns that these tariffs could severely hinder British competitiveness in the international market.
The luxury retail sector, in particular, appears disproportionately affected. Since the removal of the tax-free scheme, brands such as Hirsh London and Watches of Switzerland Group have reported notable declines in sales from international visitors. The letter indicates that the absence of tax rebates has made the UK a less attractive shopping destination, pushing American tourists to opt for European hubs like Paris and Milan, which still offer such incentives. According to the CEOs’ collective statement, it is vital not only to restore the tax-free shopping policy but also to consider it a foundational strategy for growth rather than a mere luxury.
Further compounding the issue, the tourism sector has highlighted that this tax removal has negatively impacted broader economic factors, including hospitality and transport. Bernard Donoghue, CEO of the Association of Leading Visitor Attractions, articulated this concern, noting that visitor numbers to top UK attractions remain below pre-pandemic levels despite some recovery. The absence of tax-free shopping is likely contributing to a reduced market share within a competitive European context, with VisitBritain having forecasted a decline in the UK's attractiveness to tourists, particularly from Europe and Asia, by 2028.
Industry advocates argue that reinstating tax-free shopping could not only reverse the decline but also stimulate approximately £10.7 billion in economic activity, as predicted by the Centre for Economics and Business Research. The report asserts that the previous fiscal strategy did not sufficiently account for the impact of lost tourist spending across various sectors, including hospitality, restaurants, and entertainment.
Moreover, the chancellor has come under pressure from over 300 business leaders, including those from significant retail names such as Mulberry and Selfridges, to abolish what has been termed the 'tourist tax'. They contend that this levy may be costing the economy upwards of £11 billion annually due to lost shopping-related expenditures. With tourists being essential to many sectors, industry leaders emphasise that Scottish whisky, luxury fashion, and other hallmark British goods are at risk as overseas visitors redirect their spending to competitor markets.
As the UK finds itself navigating these economic challenges, the collective call from the retail and tourism sectors presents a strong case for government reconsideration of tax policy. The persistence of this demand reflects a broader concern regarding the future viability of British high streets in a global marketplace that increasingly prioritises attractive consumer incentives. Encouraging greater tourist spending through tax-free shopping could be an essential step in revitalising the British economy during this turbulent period.
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Source: Noah Wire Services