Retailers in London’s West Finish have suffered a £220 million loss in unrealised gross sales within the first half of 2024, following the UK authorities’s choice to scrap tax-free looking for abroad guests, in keeping with new analysis by the New West Finish Firm.
Regardless of a rise in worldwide guests, the realm’s retailers are anticipated to face a bigger monetary hit this yr than the estimated £400 million loss in 2023.
The earlier Conservative authorities eradicated tax-free buying beneath plans by Jeremy Hunt, the then-chancellor, as a part of efforts to shore up public funds. Retailers argue that the coverage places Britain at a aggressive drawback in comparison with the European Union, the place vacationers can obtain VAT refunds on purchases over a sure threshold.
Dee Corsi, Chief Government of the New West Finish Firm, highlighted the broader implications of the so-called “vacationer tax,” noting its detrimental results on the whole tourism ecosystem. “The lack of £400 million in unrealised gross sales final yr within the West Finish alone is only a small a part of this story. Fewer gross sales on the store ground means fewer vacationers in eating places and inns,” Corsi stated. “If the federal government is critical about returning the nation to progress, tax-free buying presents a uncommon, golden alternative to take action.”
These figures emerge as Chancellor Rachel Reeves prepares her first funds on the finish of October. Reeves has cautioned that robust choices on tax rises and spending cuts are crucial to deal with the general public funds, and Labour has said it won’t reinstate tax-free looking for vacationers. The occasion is targeted on elevating revenues with out rising revenue tax, VAT, or nationwide insurance coverage.
The New West Finish Firm, which represents 600 retailers, inns, and eating places in fashionable buying areas similar to Bond Road, Oxford Road, Regent Road, and Mayfair, calculates the unrealised losses by evaluating passenger arrivals at London’s airports with cost information for worldwide transactions within the West Finish. These estimates are benchmarked towards 2019 figures, when tax-free buying was nonetheless accessible, and £500 million in reductions had been processed, in keeping with the Workplace for Funds Accountability.
Whereas total customer numbers to London have risen by 3% within the first half of 2024 in comparison with the identical interval in 2019, spending has dropped by 12%. This contrasts sharply with a 36% enhance in abroad spending throughout the European Union, highlighting the aggressive drawback confronted by UK retailers.
The New West Finish Firm is urging the federal government to reinstate tax-free buying, arguing that it will degree the enjoying area for British companies towards their European counterparts. “The removing of tax-free buying isn’t just about misplaced retail gross sales; it has a cascading impact on the whole tourism and hospitality sectors,” the affiliation stated. “Reinstating the coverage would offer a significant increase to the UK economic system at a time when progress is urgently wanted.”
As strain mounts on the federal government to rethink its stance, the impression of the vacationer tax on London’s retail sector underscores the challenges confronted by companies making an attempt to draw worldwide spending in a post-Brexit, post-pandemic panorama. With out coverage adjustments, the UK’s place as a prime vacation spot for buying and tourism may proceed to say no, with important financial repercussions for the capital and past.