UK firms lose £4bn this summer due to tourist tax

This summer, UK businesses faced significant financial losses, amounting to approximately £4.3 billion, primarily due to a tourist tax that deterred overseas visitors from shopping in the country. Research conducted by Global Blue highlighted that EU visitors alone accounted for £3.8 billion in lost spending between April and July, with an additional £500 million lost from travelers from the US, China, and the Middle East. The tax has been criticized for pushing potential shoppers to other countries, impacting the UK’s retail sector. The reinstatement of VAT-free shopping for international visitors has been proposed by industry leaders, including executives from Kurt Geiger and Burberry, who argue that it could significantly boost the economy. They contend that if the tax were abolished, the UK would have been the only major European country allowing tax-free shopping for 450 million EU residents, potentially generating £1.9 billion in retail spending and an equal amount in hospitality and leisure activities over the summer. The financial implications extend beyond immediate losses, with estimates suggesting that British businesses could have seen a total of £10 billion in revenue from EU residents throughout 2024 if the tax were removed. Critics of the tax assert that it hampers growth and competitiveness, particularly as the UK seeks to recover economically post-Brexit. The Chancellor faces pressure to reconsider the tax policy, especially as Labour aims to promote growth and address the £22 billion deficit left by the previous government. Industry representatives are hopeful that a review of the tax could lead to a more favorable environment for international shoppers and stimulate the UK economy.