West End bosses reacted with fury to the Chancellor’s decision to perform a U-turn on the reintroduction of VAT free shopping for foreign tourists.
They said it would deliver a “hammer blow” to the recovery of London’s shopping district and will pujt the capital at a disadvantage to rivals such as Paris and Milan in the run up to Christmas.
Today’s decision by Jeremy Hunt represents the third change of heart on the measure by successive Chancellors.
Rishi Sunak originally axed the perk - which allows overseas visitors to claim back 20% on their purchases in the UK - in January 2021 when Brexit was implemented.
The decision was reversed in Kwasi Kwarteng’s mini-budget last month in a move that was warmly welcomed by tourism and retail chiefs.
But today Mr Hunt said the revival of tax free shopping was unaffordable and would have to be put on hold in a move that triggered an anguished reponse
Paul Barnes, chief executive of the Association of International Retail, said:“The decision to reverse plans to reintroduce VAT free shopping for international visitors will come as a hammer blow to UK tourism and the British high street. “This short-sighted move is based on inaccurate and incomplete projections, and risks putting a brake on the return of international visitors who are vital drivers of economic growth throughout the UK. “We urge the Chancellor to pause, reflect and commit to a full cost-benefit assessment before deciding on the future of tax-free shopping, which we know is a key motivator for international tourists when choosing where to visit.
“Ministers must base their decision on the full picture, including the significant economic benefit that international visitors bring to the UK, which this decision puts at risk.”
Helen Brocklebank, CEO of the luxury brands trade body Walpole, said: We are disappointed that the government has decided not to proceed with its policy to return tax free shopping, a policy which will quickly deliver growth.
“The scheme could deliver predicted direct retail sales of at least £1.2 billion and wider associated spend across tourism and hospitality, the positive impact on jobs and prosperity of which would be felt in every part of the UK. It would have been a significant boost to UK manufacturing which forms part of the wider ecosystem of the sector and supports jobs across the country. With our members, Walpole will work closely with the new Chancellor, first and foremost to try to secure a review of the true benefits this scheme might bring.”
The UK Travel Retail Forum (UKTRF) is extremely disappointed to see the UK Government U-turn on its pledge to reintroduce VAT-free shopping, less than a month after it was announced.
Nigel Keal chair of UK Travel Retail Forum Nigel Keal said: “The Government’s latest U-turn on tax-free shopping is a huge blow to the travel retail industry and the airport community. With the recovery of international travel still delicate, last month’s announcement of a new airside VAT-free scheme offered our sector hope for the potentially difficult months and years ahead. We are incredibly disappointed that the Government has already turned its back on its pledge, which was unanimously welcomed by businesses and passengers alike.
The UK is one of the only major economies not to have a VAT-free shopping scheme in place, making us globally uncompetitive.
We appreciate difficult decisions must be made, however as the economic situation worsens, and the cost-of-living crisis threatens to impact international travel, we urge the Government to reserve judgment until it has carried out a full cost-benefit analysis to fully understand the potential opportunity.”
