London retailers are suffering from the continued impact of VAT on overseas spending as Chinese tourists returning to the capital spend “significantly less” than they did before the Covid-19 pandemic.
According to the New West End Company’s latest research, there is a “growing gap” between the number of international tourists visiting the capital and their “propensity to spend”.
The gap between international visitor travel and spend in comparison to figures from 2019 has grown from one percentage point in the first quarter of this year to 31 points in the third quarter.
Despite restrictions on group travel in China being lifted on August 10, visitors returning to London are spending “significantly less” than they did previously.
During the month of September, arrivals from China were only 2% down on arrivals in 2019 but spend dropped by 58%, “indicating a severe cutback in shopping outlay per traveller”.
Previous research by the New West End Company showed that tourists are “increasingly aware” that the UK no longer offers tax-free shopping, choosing to spend elsewhere in Europe as a result.
According to this data, 77% of international visitors to the West End said they would spend more if they were able to claim the VAT back on their shopping.
New West End Company added that the “spending gap” is also reflected in data from visitors from other countries. Flight bookings from the US to London, for example, have exceeded 2019’s figures by 18% despite US tourists spending 18% less in the same period.
New West End Company chief executive Dee Corsi said: “The West End’s allure for international tourists remains resilient, with its world-leading retail and leisure offering continuing to attract visitors.
“However, despite delivering exceptional experiences and products, the absence of tax-free shopping is hindering growth and impacting consumer spending.
“Whilst tourists cut back in the UK, continental Europe reaps the benefits, with spending in France and Spain more than doubling in recent months.
“The evidence is clear and the message from businesses consistent: the return of tax-free shopping would deliver a much-needed boost to the Treasury at a time when the country is dealing with a cost-of-living crisis and high inflation.
“We continue to call upon the Treasury to conduct an independent review of the policy’s effects. A reversal of the ‘tourist tax’ is a simple measure that would have a significant impact and help to restore London’s competitive edge.”
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