Shops in London are struggling to lure tourists to stores following the government’s introduction of VAT on overseas spending.
The post-Brexit tourist tax has meant London shops are not capitalising on a post-Covid uplift in travel as customers are now choosing to shop in Paris and other European cities.
Research by the New West End Company found tourists from the US and the Gulf region reduced their spending in the West End by 1% and 17% respectively in the three months to June compared with the same period in 2019.
However, flight bookings to London from these regions rose by 17% and 7% compared to the same period in 2019.
Spending by American tourists increased by 183% in France and 174% in Spain during the three months to June. Visitors from the Gulf region spent 118% more in France and 112% more in Italy.
The decision to scrap VAT-free shopping for visitors outside the EU following Brexit has prompted concerns from several leading business figures.
New West End Company chief executive Dee Corsi said the figures “should set alarm bells ringing in Westminster.”
She added: “It’s plain to see that more tourists are becoming aware of the tax-free shopping issue and are choosing to spend their money in European cities other than London.
“For West End businesses, this is a particularly acute issue as international visitors make up a significant proportion of all retail and leisure sales.”
The bosses of brands such as Mulberry, Selfridges and Harrods have warned the tax threatens retail sales as well as the UK’s international competitiveness.
Mulberry closed its Bond Street store after the tax led to “a dramatic drop in footfall and sales.”
The New West End Company estimates scrapping the tax could increase Treasury receipts by at least £350m.
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