Another day, another piece of proof that the loss of VAT-free shopping for tourists is hurting London’s luxury retail sector. This time it’s from the body that represents West End businesses, the New West End Company.

It said bluntly that the “loss of tax-free shopping cost West End retailers £220 million in the first half of 2024”. And it added that last year, retail businesses in the district lost a total of £400 million in spend due to the absence of tax-free shopping.

The lost sales are expected to be even bigger for the whole of 2024 after that H1 deficit.

Tax-free shopping ended after the UK left the EU, despite hopes/expectations that it would instead not only be retained, but extended to EU consumers. This would have made Britain the only major European country to offer the perk to global consumers.

The West End is the UK’s biggest flagship shopping destination and when unrealised sales in London’s nearby Knightsbridge are added to the West End deficit, as well as such lost sales in key destination cities such as Edinburgh, Birmingham, Cardiff, Glasgow, Manchester, Belfast and more, the numbers will be eye-wateringly high.

Tourists are still coming to the UK, of course, and NWEC also said that the number of international visitors to London was 3% above pre-pandemic levels in H1. But they’re not necessarily ‘shopping tourists’ on a mission to blitz the UK’s luxury retail sector. Despite that visitor rise, spend in the West End was around 12% lower in the first half compared to H1 2019, when tourists still benefited from VAT-free shopping in the UK.

NWEC said that “the absence of tax-free shopping continues to act as a powerful disincentive for international visitors, who can save up to 20% on purchases made in Continental Europe compared those made in the UK. This has created a persistent, and worrying, ‘spending gap’, which has opened up between international visitor numbers and their associated spend”. 

And as if the aforementioned 12% drop wasn’t bad enough, NWEC also said that based on Global Blue data, international spend in Continental Europe has risen sharply since 2019, by as much as 36% in H1.

NWEC’s CEO Dee Corsi said: “It is bittersweet for the West End that, whilst London remains a highly desirable global travel destination, the absence of tax-free shopping continues to act as a drag on overall spending growth.

“As London Fashion Week concludes, in its 40th anniversary year, we are reminded of the incredible craftsmanship and innovation that makes British fashion globally renowned. And yet, the growth of this vital sector is being hindered, and retailers forced to compete at a disadvantage.

“Critically, the loss of £400 million in unrealised sales last year in the West End alone is just a small part of this story; fewer sales on the shop floor means fewer tourists in restaurants and hotels, and a knock-on impact on our entire tourism ecosystem. If the Government is serious about returning the country to growth, tax-free shopping presents a rare, golden opportunity to do so.”