Britain is losing its position as a top destination for big-spending international tourists in the EU after the government abolished duty-free shopping early last year, according to a new study.
Its findings reflect warnings from retailers and operators in the leisure and hospitality sectors across the UK that the move would make the country less attractive to tourists.
When the UK was still part of the EU, visitors from outside the bloc could claim a VAT refund on most purchase receipts, but the rule was scrapped after Brexit.
Global Blue, the duty-free shopping reimbursement agency, compared the behavior of tourists from the Gulf States to the EU in 2019 with their shopping habits last year. He revealed that around a fifth of those shopping on the block in 2021 had previously only shopped in the UK two years earlier, where they spent an average of €24,000 each. Last year, their spending fell to zero in the UK, but rose to €22,000 each in the EU.
Almost a third of those shopping in the EU in 2021 had already shopped in mainland Europe and the UK in 2019, but increased their average annual spending per person in the bloc by 40% to 22 000 € last year, according to the study.
Businesses will this week renew calls for the government to do more to encourage high-spending international tourists to return to UK high streets and retail destinations to help the sector rebound from the impact of the pandemic of coronavirus.
Paul Barnes, chief executive of the Association of International Retail (AIR), will use an appearance before MPs to reinforce the need to bring spendthrift tourists back to the UK.
“While domestic shoppers are returning strongly to the high street, we are seeing a noticeable absence of high-spending international visitors that goes beyond the consequences of the pandemic,” he said ahead of the House of Commons hearing. Commons Digital, Culture, Media and Sports Committee to promote Britain abroad.
“The Treasury must reconsider its decision to abolish tax-free purchases,” he added.
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He said the UK was giving other countries, including France and Italy, a 20% price advantage over the UK, ‘pushing those who traditionally contribute around £28.4 billion per year to our economy to continental Europe”.
Vaughan Allen, chief executive of CityCo, which runs Manchester’s business improvement district, said: “The visitor economy supports 100,000 jobs in Manchester. Putting an end to zero-rated purchases is a blow.
Heathrow Airport’s director of retail and property, Fraser Brown, said: ‘In this post-Covid world, we have to compete harder than ever with our European neighbors who have gone in the direction opposed by making their tax refund schemes more generous in an attempt to keep visitors away from the UK.
AIR said non-EU visitors spent £17.8bn in 2019, including £3bn on duty-free shopping and the remaining £14.8bn on hotels, restaurants, travel, culture and entertainment, generating around £3 billion in VAT. He calculated that a 15% cut in the non-trading part of that spending would more than remove the £400 million in VAT the Treasury plans to collect by ending duty-free shopping.
He estimated that 20,000 jobs would be lost across the country as a direct result of the end of duty-free shopping in high streets and at airports.
Along with a review of ending duty-free shopping, AIR is also urging the government to improve the e-visa waiver system for foreign visitors.