There has been an increasing number of voices criticising the Government’s refusal to restore VAT free shopping for foreign tourists. Tax free shopping for foreign visitors, which saves them 20pc on their eligible spending, was scrapped by then Chancellor Rishi Sunak in early 2021 when Brexit came into effect. The Treasury has argued that the perk mainly benefitted central London and was not a major lure for overseas visitors.
As London’s Deputy Mayor for Culture and the Creative Industries, Justine Simons, has said, “culture is the heartbeat of our capital, with our world-class offer bringing in visitors from across the globe and playing a vital role in the UK’s economic recovery.” During May’s Coronation weekend, footfall in the West End (central London) was up almost 70pc compared to 2022, showing London’s enduring national and global appeal. But visitor figures for some of the most important cultural institutions have not yet returned to pre-pandemic levels with some up to 40pc below where they were in 2019.
A crucial reason for this is the abolition of tax-free shopping, whereby visitors from overseas are refunded the VAT on purchases made in the UK. This is a huge missed opportunity to attract tourists that the UK must seize to ensure future success.
Cultural destinations are typically heavily reliant on tourists from overseas. Prior to the pandemic, international visitors accounted for two-thirds of all visits to the British Museum and the National Gallery. And some theatres have reported that more than a third of their audience comes from international tourists.
Following Brexit, additional visas and other barriers that are now in place are making it harder for the UK to attract visitors from Europe and further afield. And the lack of tax-free shopping, which is on offer in many other cities around the world, is one such barrier. International tourists for whom retail is a priority may, therefore, choose London’s competitors for their trip.
A simple solution is to reintroduce tax-free shopping. This was once a strong incentive to visit the UK, but since it was abolished, Britain is now the only major European country not to offer tax-free shopping.
The current campaign focused on how this directly impacts the retail sector. But the knock-on effect on the cultural sector must not be forgotten. Data from Global Blue for last year shows a huge diversion of retail spending by international visitors away from the UK, to Britain’s competitors, including France, Italy and Germany. By choosing to visit these countries rather than the UK, international travellers are also spending less on UK’s fantastic, cultural attractions.
These attractions are world-class, acting as a major driver of tourism to London in their own right, performing a powerful ambassadorial role around the globe and promoting Britain overseas. The GVA of the arts and culture sector in the West End alone was an estimated £4.9bn in 2019, equivalent to 23pc of all London’s arts and culture sector output.
As Emma de Souza, executive director of audience and commercial at the Society of London Theatre has said, theatre exists in a complex and interconnected tourism ecosystem with retail, hospitality and other businesses in culture and entertainment. “Any action, such as the reintroduction of tax-free shopping, that increases visits to London will be welcome.” There is no doubt that London is still an international cultural superpower. In the West End there are 100 commercial galleries, 78 archive collections, 53 music venues, 45 jewellery design houses, 44 theatres and 11 dance venues, helping to attract 200million visitors a year.
From outlying shopping malls to regional airports to stores in fashionable streets, tax-free shopping would bring a much-needed £4.1 billion boost to GDP and support 78,000 jobs. The government must review data and consider reinstating tax-free shopping to incentivise people from overseas to visit the UK and help spur economic growth.
(The writer is our foreign correspondent based in the UK)
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