Luxury brands call for tax-free shopping in the UK

Luxury trade body Walpole, which includes Burberry, Harrods, and Claridge’s among its members, is calling for the reintroduction of the VAT RES scheme, which it states could result in direct retail sales of at least 1.2 billion pounds.

250 luxury brands are calling on the government to reintroduce tax-free shopping to ensure that the UK’s economic recovery matches its European counterparts. This is alongside demands to introduce a smoother tourist visa scheme, which they state would help the UK’s post-pandemic tourism economy match that of France, Italy and other EU countries, all of which are returning to pre-pandemic levels at a much faster rate.

The findings were unveiled in Walpole’s new tourist report, ‘What It’s Worth: Enabling The Return of the £30bn High-End Tourism Sector,’ which highlights the value of high-end tourism to the UK’s economy and the need for government action to allow the UK to be prosperous.

High-end tourism in the UK was worth 30 billion pounds in 2019 alone, adds Walpole, but Britain is struggling to recover to pre-pandemic levels. It believes that it's because of the governments decided to abandon the tax-free shopping scheme in 2020, which it estimates has resulted in a 38 percent drop in retail sales to non-EU visitors.

The report outlines the role that tourism played in Britain’s economy pre-pandemic, sharing that tourism, both domestic and international combined, contributed to 4 percent of GDP and had an overall value of 85 billion pounds. Of which, 30 billion pounds was attributed to ‘high end tourism,’ defined as those who stay in luxury accommodation including five-star hotels.

These high-end visitors typically spend 14 times more than the average visitor, adds Wimpole. With 1 pound spent by those in high-end accommodation in the UK generates 8 pounds of value in other industries, such as culture, entertainment and luxury shopping, which in turn supports the 160,000 jobs across the UK luxury sector.

UK losing high-end tourists to Europe due to lack of tax-free shopping

Since Brexit and the pandemic, Britain has lost its position as the favoured destination for high spending international tourists, adds Walpole, with the UK being the only European country not to offer tax-free shopping to non-EU tourists. Ahead of VAT RES officially ending in 2020, HMRC surveyed international visitors and found that 69 percent were influenced by the opportunity of tax-free shopping when deciding to visit the UK. This has resulted in a significant shift for international visitors, who Walpole adds are heading to France, Italy and other EU destinations over the UK, and this is already being reflected in the UK’s international visitor retail spend post-Covid.

Spending on shopping by visitors from Gulf Cooperation Council (GCC) in the EU in Q4 2021 was at 153 percent of Q4 2019 levels, while in the UK, it was at just 60 percent of 2019 levels. During the same period, for US visitors, retail spend in the EU had returned to 91 percent of pre-Covid levels, but in the UK it was only at 49 percent.

By reintroducing the VAT RES or a similar scheme, the UK stands to gain 1.2 billion pounds in direct retail sales and will attract 600,000 additional visitors annually.

In addition, Walpole adds that the UK’s visitor visa has “fallen behind” that of Schengen making Britain a less attractive destination and the UK’s Electronic Visa Waiver Scheme for incoming tourists has made the UK a "less accessible" destination compared to EU countries.

Walpole chief executive Helen Brocklebank said in a statement: “To say that it has been a challenging few years for the UK tourism industry would be an understatement, however we are now in a position where the UK can open its doors to the world and welcome back international tourists – especially those high-end tourists who are looking to spend in our luxury hotels, restaurants, shops and cultural venues up and down the country, all the while aiding economic growth and job creation. By doing this, we can work together to make the UK the destination of choice for those looking to travel post-Covid and fuel the UK’s long-term recovery.”