Retailers urge Reeves to reinstate VAT-free shopping

Retailers are urging chancellor Rachel Reeves to reinstate tax-free shopping for tourists as US escalating tariffs continue to cause disrupture, The Times has revealed. In a joint letter to the chancellor, seen by The Times, four major trade bodies — the British Retail Consortium, the British Beauty Council, Walpole and the British Fashion Council — said the tariffs could inflict “long-term damage” on British competitiveness and urged the government to take action to bolster domestic sales and international appeal. Retailers, fashion labels, beauty brands and luxury firms say US trade policy under the White House is straining transatlantic trade. Some UK businesses have cancelled orders or pulled out of the US market altogether, while others are under pressure from American buyers to reduce wholesale prices. Companies also report a “significant” decline in consumer confidence among US shoppers, who are reacting to rising prices by scaling back their spending. In the letter, the retail groups said: “US tariffs will negatively impact our businesses’ profitability. We are considering how we, as associations, and the UK government could best support businesses at this time.” According to the groups, one of the most noticeable changes has been in consumer behaviour. UK brands report that American shoppers, especially in premium segments like fashion and beauty, are increasingly opting to travel abroad to make purchases instead of paying higher prices domestically. However, with the UK no longer offering tax-free shopping for visitors, many are choosing to spend in cities like Paris and Milan, where tax refund schemes are still available. According to Bain and Company data, for every £1 spent by high-value international visitors, £8 flows into the wider UK economy, and wealthy tourists spend 14 times more than the average visitor. Amid these developments, there is growing pressure to reinstate VAT-free shopping for international visitors. The scheme, which was ended in 2021 following Brexit, had allowed tourists to reclaim the 20% VAT on purchases made in the UK. A Treasury spokesman told The Times: “We have no plans to introduce a new tax-free shopping scheme in Great Britain. Visitors can continue to claim VAT relief where the items purchased are shipped directly to their home country as exports.”