Tourist spending in central London has plummeted by an estimated £1.1 billion over the past year, despite a notable increase in visitor numbers. A recent report from the Heart of London Business Alliance, which represents businesses in iconic areas such as Piccadilly Circus, Leicester Square, and St James's, highlights a significant slump in expenditure in the 12 months leading up to March.
The business alliance attributes this substantial decline directly to the absence of tax-free shopping for international visitors. This policy, abolished by the Government in 2021, means that non-EU tourists cannot reclaim VAT on purchases made in the UK, unlike in many other European capitals. Businesses argue that this puts London at a distinct disadvantage, deterring high-spending tourists who might otherwise choose the capital for luxury retail.
While London has seen a welcome return of tourists post-pandemic, the data suggests that these visitors are not spending at the same levels as before, particularly in the high-value retail sector. The report indicates that international shoppers are instead opting for destinations like Paris, Milan, and Madrid, where they can benefit from tax rebates on their purchases, thereby making their money go further.
The Heart of London Business Alliance has been a vocal critic of the current policy, consistently urging the Government to reconsider its stance. They argue that reinstating tax-free shopping would not only revitalise the West End's retail sector but also generate substantial economic benefits across the wider UK economy through increased tourism, job creation, and investment.
The Treasury has previously defended its decision, citing the cost of the scheme and questioning its overall economic benefit. However, opposition parties and a growing chorus of business leaders contend that the lost revenue from reduced tourism spending, coupled with the competitive disadvantage, far outweighs any savings from the abolition of the scheme. They argue for a comprehensive review of the policy to ensure London can compete effectively on the global stage for tourist spending.