The bosses of Heathrow, Selfridges and Harrods have warned that shoppers will leave London for Milan or Paris unless the government reinstates duty-free shopping.
The heads of the UK’s top high-end shops claimed they are at a disadvantage because shoppers could simply travel to rival European destinations to spend their money.
It comes after the Mayor of London co-signed a letter to the Chancellor of the Exchequer, Jeremy Hunt, calling for the shopping perks for international visitors to the UK to be reinstated.
He wrote: “Our rich ecosystem of shops, hospitality venues, and cultural attractions, is heavily dependent on both domestic and international tourists.
“That is why together, London’s business groups and I have repeatedly called on the government to support the return of international tourists back to London, in what is a highly competitive international market, by reinstating tax-free shopping for overseas visitors and also extending this to EU visitors. The return of VAT-free shopping would provide a much-needed boost to London’s retail and hospitality sectors at a time they need it most”.
Steve Medway, CEO of the Knightsbridge and King’s Road Partnerships, representing over 500 businesses in the Kensington and Chelsea area, including major signatories to the letter, said: “The Mayor’s letter hits the nail on the head; the withdrawal of tax-free shopping puts London as an international tourist destination at a disadvantage.
“London has everything to offer, and much to gain, if the Chancellor sees reason and reintroduces a benefit that visitors from newly reopened China can get if they choose Paris or Milan instead of London.”
Kay Buxton, Chief Executive of Marble Arch London BID, which signed the letter, claimed research showed that reinstating duty-free shopping could add £3bn to the UK economy.
She said: “We support the Mayor of London’s call for the return of tax-free shopping for international visitors. We felt the Chancellor missed a trick at the last Budget by not reintroducing tax-free shopping for international visitors as this is one area which would have made a huge difference for not only the retail industry, but for leisure and hospitality businesses as well.
“It followed research from the Association of International Retail which found that reintroducing tax-free shopping would have brought in an additional 1.6 million visitors in its first full year.
“It also estimated that these new visitors would have spent an extra £2.1bn on shopping, along with an additional £1bn on other goods and services such as hotels, restaurants and other leisure activities which would have been a vital boost for these businesses.
“We hope the Mayor’s letter will convince the Chancellor to rethink his position on tax-free shopping as a reversal on this policy would greatly benefit our hospitality businesses who offer excellent, world-class service and choice across Marble Arch.”
An HM Treasury spokesperson told the Local Democracy Reporting Service: “The Chancellor has been clear that being responsible with the public finances is a priority. Introducing a wide-ranging VAT-free shopping scheme would come at too high of a cost, as has been supported by previous estimates from the Office for Budget Responsibility.
“Tax-free shopping continues to be available for all non-UK visitors who purchase items in store and have them sent directly to their overseas address.”
They said the Office for Budget Responsibility found that removing Vat-free shopping would raise a significant amount of revenue and have a limited effect on people’s choices to visit or spend their money in the UK.