Chinese tourists are returning to London after restrictions on travel were lifted, but they’re spending dramatically less than before the pandemic.
The New West End Company, which represents stores and hotels in the busy London district, has found that tourists are increasingly aware that the UK no longer offers tax-free shopping post Brexit, and are diverting their buying to elsewhere in Europe.
It means that even when visitor numbers to the British capital increase, sales aren’t keeping up.
The number of Chinese visitors to London was just 2% shy of 2019 levels in September, but their spending was down 58%, the group said. Overall, the gap between the total of international visitors and their spending in the capital compared to 2019 has grown from 1 percentage point in the first quarter to 31 percentage points in the third.
“No tax-free shopping is a major disadvantage in the competition to attract high-spending international visitors,” said Michael Ward, managing director of Harrods, who added that the impact extends far beyond the retail sector in London.
Read More: London West End Shops Say ‘Tourist Tax’ Worse Than Inflation
Three-quarters of international visitors to the West End said they would spend more if they were able to claim back the 20% VAT on their purchases. Visitors from outside the European Union were able to reclaim tax paid on their spending until January 2021, when the policy expired.
Retailers have been clamoring for a U-turn, and members of Parliament debated the situation in September, with a call for the government to commission an independent review. There “could be a hugely positive and almost instantaneous win for the UK economy” should the tax reimbursement be reintroduced, Conservative MP Geoffrey Clifton-Brown said at the time.
In August, 350 business leaders, including heads of British Airways, Marks & Spencer Group Plc, Burberry Group Plc and Mulberry Group Plc, signed an open letter to the Chancellor of the Exchequer, calling the so-called ‘tourist tax’ “a spectacular own goal.”
As part of the campaign, the Centre for Economics and Business Research said that the lack of VAT refunds is costing the UK £10.7 billion ($13 billion) in lost GDP and two million extra visitors a year.
“The absence of tax-free shopping is hindering growth and impacting consumer spending,” said Dee Corsi, chief executive of the New West End Company. “Whilst tourists cut back in the UK, continental Europe reaps the benefits.”
--With assistance from Eamon Akil Farhat.
