UK ‘tourist tax’ reportedly costing 11.1 billion pounds in lost GDP

A new report by the Centre for Economics and Business Research (Cebr) has said that the UK’s widely debated ‘tourist tax’ is costing the region’s economy 11.1 billion pounds in lost gross domestic product (GDP).

Cebr said that it had used tourist data released by the government last week to analyse the impact of scrapping the VAT-free shopping scheme that had been in place until 2021.

The organisation concluded that restoring the scheme would “deliver a significant boost to the public finances”, with a net fiscal gain of 2.5 billion pounds to potentially come in.

Data released by the Office for National Statistics (ONS) revealed that tourist numbers were beginning to recover following the pandemic, with figures rising 9.3 percent in the third quarter of 2023.

Visitors ultimately spent 10.1 billion pounds during this period, up 11.2 percent on the year, however Cebr noted that these numbers still remained short of pre-pandemic levels.

Calls for the return of the VAT-free scheme have only heightened in the past year after 350 businesses, including Marks & Spencer, Mulberry, Primark and the British Fashion Council (BFC), came together to sign an open letter on the issue that was submitted to chancellor Jeremy Hunt ahead of his Autumn Statement.

In the letter, signatories highlighted that tourists were opting to travel to other European cities over London as a result of the VAT, adding that the Treasury’s calculations did not take into account wider tourist spending in cultural and hospitality venues.