Last week, Jeremy Hunt unveiled the “Edinburgh Reforms”, with the aim of revolutionising the UK’s financial service sector, seizing the benefits of Brexit and promoting growth.
It was a vital step by the Chancellor to assist Britain’s financial service industry and secure its international competitiveness. However, many other industries also offer opportunities to support growth following Brexit, with the possibility of drastic benefits in towns and cities across the country.A similar opportunity is the VAT Retail Export Scheme or tax-free shopping.
The Chancellor’s efforts to restore confidence by cancelling many elements of the mini-Budget were crucial for regaining stability. However, by dismissing calls for the reinstatement of tax-free shopping, he also threw away a key opportunity for growth.
Today, in the House of Lords, I will be making the case for the Chancellor to take another look at the tax-free shopping scheme as a vital growth measure. The Chancellor has succeeded in calming the markets with the November Autumn Statement. He has also demonstrated through the “Edinburgh Reforms” that he is aware of the need to still go for growth. This makes it even more important to understand the full impact of low-cost, efficient and immediate growth measures.
A recent study conducted by Oxford Economics and the Association of International Retail proves that this low-cost measure would have an immediate benefit, supporting tourism, retail and hospitality industries not just in London but across the UK.
While the decision in January 2021 to scrap the scheme left Britain as the only major European country not to offer tax-free shopping, Britain now has the opportunity to become the only major European shopping destination where EU residents can shop tax-free.
This opens up a brand-new market and would have a significant benefit on the regions, with regional airports primarily serving EU destinations.The study also estimated that restoring tax-free shopping would provide a £4.1 billion annual increase in GDP and support 78,000 jobs across the country.
As I mention in my appearance in the House of Lords today, this study proves that the Chancellor’s decision to scrap the measure was based on inaccurate and incomplete information. The Chancellor must make decisions on the facts that he is presented with, however, the discrepancy between the conclusions from Oxford Economics and the Treasury’s figures are so drastic that I would join industry in urging the Chancellor to commission an independent assessment from the Office for Budget Responsibility (OBR).Unlike other growth measures —which often require funding to be moved from one sector to another — tax-free shopping would be bringing in money from outside the UK, in effect promoting tourism as a British export.
The impact on growth would also be immediate. When the EU allowed British residents to shop tax-free, British residents spent £250 million on tax-free shopping in the EU in 2021 and £500 million in 2022. This is likely to rise even higher in future years as foreign travel returns and British travellers become more aware of tax-free shopping opportunities in the EU.
However, it is not just British visitors now shopping in the EU. Crucial high-spending international visitors are also diverting their spend to France and Italy. The lack of tax-free shopping in the UK resulted in EU economies growing by billions of pounds as international visitor diverted their spending from the UK to EU countries.
Not only is British spending moving to the EU, but global brands are also revising their capital investment plans as a result of the lack of tax-free shopping. Mulberry, for example, announced earlier this month that it was considering closing its Bond Street flagship store as a direct result of ending tax-free shopping.
The Chancellor is right to be looking at growth measures having steadied the ship and the opportunities presented by Brexit, such as tax-free shopping, should be reconsidered not just in the financial services industry but, in other industries, as well. The restoration of tax-free shopping will help our retail, tourism and hospitality industries to thrive.
