NWEC calls for return to tax-free shopping as tourist spending gap widens

The New West End Company (NWEC) has called for the return of tax-free shopping as the gap between the number of international visitors in London and the spending associated with them widened in the final quarter of last year.

According to the latest figures released by NWEC, despite a recovery in visitor numbers to pre-pandemic levels, at its widest in Q3 2023, the gap between the recovery in the number of international tourists visiting London and the spending associated with them widened to 31 percentage points in Q3 2023.

The gap persisted in Q4 2023, despite an influx of visitors over the ‘Golden Quarter’. The report also stated that whilst overall visitor numbers for October to December were level with 2019, international spending was down 15%.

Full-year figures revealed that whilst international visitor numbers in 2023 were just 4% below 2019 levels, spend was down 19%.

The widest ‘spending gap’ was amongst affluent visitors from the Gulf, including those from Saudi Arabia, the UAE, Qatar and Kuwait. There were 39% more travellers from the region in the last three months of 2023 compared to the same period in 2019, but spending increased by just 6% – a gap of 33 percentage points.

The full-year figures also revealed that visitor numbers were up by 20% but spending was down by 10% – a gap of 30 percentage points.

That trend is replicated by visitors from other major tourism markets, such as the USA. Over the course of 2023, 8% more Americans visited London, but they spent 14% less whilst here. These gaps are “particularly concerning” for the U.K., as they are not present in the European Union, where countries such as Italy, France and Spain offer tax-free shopping.

According to Q4 2023 data from Global Blue, US spend in Spain was up 179% compared to 2019, and up 143% in Italy. Similarly, spend from GCC visitors in Q4 2023 was up by 148% in Italy and 132% in France, versus Q4 2019.

The lobby group told The Times that the figures “add weight to the calls from businesses to remove the tourist tax, which is responsible for a reduced propensity to spend among tourists”.

The new figures follow the news that chancellor Jeremy Hunt had asked the Office for Budget Responsibility to look at whether the scrapping of VAT-free shopping for tourists should be reversed, delivering a much-needed boost to Britain’s retail and leisure sectors.

Dee Corsi, NWEC chief executive, said: “The persistence of a ‘spending gap’ across 2023 should sound alarm bells in Westminster – whilst Italy and France are actively leveraging tax-free shopping as a driver of growth, British businesses trade at a disadvantage.

“Tax-free shopping presents a rare, golden opportunity for the Government to inject a shot of growth into the economy, with a tried and tested scheme and a captive audience which, for the first time, would include 450 million E.U. residents.”

Corsi added: “What is more, it would allow us to maximise the returns of existing infrastructure, such as the recent launch of the ETA visa for GCC visitors. The Government has already invested in incentivising visitors from the Gulf to travel to the U.K. – why not incentivise them to spend in our shops, hotels and restaurants while they are here too?

“We are still within the window to capitalise on this opportunity, with businesses across the country united in their desire to see tax-free shopping reinstated. The news that the OBR will look at the impact data is a welcome acknowledgement, at the highest levels, that our calls are being heard. We are hopeful that the Spring Budget will see these calls answered.”