British shoppers drive surge in EU VAT-free spending after UK scheme scrapped

British spending on VAT-free shopping in the European Union (EU) has risen more than fivefold since 2021, as consumers increasingly choose to buy luxury goods abroad rather than in UK stores, according to the Times. 

New figures from the Association of International Retail (AIR) show that Britons spent £742m in the EU last year on VAT-free purchases, up from £527m in 2022 and £147m in 2021. 

Spending in the first 22 weeks of 2025 is already 16% higher than in the same period last year.

The rise follows the UK government’s decision to end tax-free shopping for overseas visitors in early 2021, a move that coincided with EU countries beginning to offer VAT refunds to British travellers for the first time.

AIR said British shoppers are increasingly “savvy”, taking advantage of VAT rebates on the Continent and making high-value purchases overseas rather than at home.

France has become the top EU destination for British VAT-free shoppers, accounting for 35% of spending, with Paris alone representing three-quarters of that amount.

The trend is also fuelling wider tourism growth, with British travellers spending more on accommodation, dining and other experiences.

The Times reported that the trend has intensified calls for the government to reinstate tax-free shopping for all international visitors, including those from the EU. 

More than 500 business leaders, including the chief executives of Burberry and Primark are backing a campaign urging chancellor Rachel Reeves to reverse the previous policy.

AIR estimates that restoring the scheme could create 73,000 jobs and generate an extra £3.65bn in gross domestic product (GDP) annually, including £1.8bn in regional growth. The group claims it could also raise more than £500m a year in additional VAT revenue for the Treasury.

Derrick Hardman, AIR chairman, said: “The disproportionate increase in British visitor numbers to the EU shows that a new market in shopping-led tourism has emerged. It’s sad to see British shoppers taking their business elsewhere, but they’ve worked out that the tax rebates on the Continent more than outweigh the cost of hopping on the Eurostar or a cheap short-haul flight.

“It makes no sense for the UK to remain the only destination in Europe not offering tax-free shopping.Thanks to our position outside the EU, we now have a unique chance to reverse the policy of the last government and become the world’s shopping capital – offering tax rebates for both EU and non-EU shoppers.” 

He added: “All the evidence shows that reintroducing a tax-free scheme would more than pay for itself, thanks to spending not just in retail but across hotels, restaurants, transport and entertainment. This government has promised to pull every lever available to promote growth – here is an obvious one.”

A Treasury spokesperson told the Times: “The UK is one of the most visited countries in the world with international tourism driving billions into our economy. We are supporting the continued growth of this industry and will be launching a national visitor economy strategy this autumn to help meet our ambition to welcome 50m international visitors a year to the UK by 2030.

“Visitors can still claim VAT relief where the items purchased are shipped directly to their home country as exports.”