UK. It is forecast that the reintroduction of tax-free shopping would attract more than 1.6 million extra visitors to the UK in 2025/26 and stimulate an extra £2.8 billion of tourist spending, according to research quoted by London Gatwick Airport Retail Director Rachel Bulford. In this guest article, she presents very strong arguments for the perk’s reinstatement for key categories in UK airport retail.
In the gloom of the autumn of 2020, London Gatwick was spending £1 million per day just keeping the airport open. Our usually bustling terminals were empty. We had only a handful of flights transporting PPE, vital cargo and facilitating repatriations. During this incredibly difficult time, Rishi Sunak – then Chancellor of the Exchequer – announced the end of tax-free shopping for international visitors.
This act of national economic harm, destroying around £3.5 billion of benefit to the UK economy, came as a total surprise to industry and business.
“The Chancellor can and must be bold – taking this action will enable us to compete more effectively with our European counterparts, support retail jobs and add economic value for airport communities” – Gatwick Airport Retail Director Rachel Bulford
Part of the government’s rationale for abolishing the scheme was that it ‘cost £2 billion per year to administer’ – an estimate which was debunked by a recent study from Oxford Economics. The study has demonstrated that reinstating a tax refund scheme would actually provide a £340 million boost to the UK Exchequer every year, with EU visitors also able to benefit.
A study by the UK Travel Retail Forum and the Association of International Retail shows that pre-COVID, the scheme was used by around 4.8 million people – 30% of all non-EU visitors – which is three times greater than the Treasury’s estimate. Many of these were from high-spending markets such as Asia, the Middle East and the USA.
London Gatwick alone has seen a -8% decline in spend within its fashion retail outlets since tax-free shopping was removed, and a -3% decline in overall spend across the airport’s retailers. This translates into millions of pounds in lost revenue.
And it’s not just aviation that is affected. Based on figures from the British Retail Consortium, tax-free shopping supported 70,000 jobs across the whole of the UK. That is just direct employment. That doesn’t consider the thousands of indirect jobs, including those in hotels, restaurants and attractions.
International visitors choose to holiday elsewhere where tax-free shopping still exists – all EU countries. That means fewer people stay in hotels, visit tourist attractions, buy souvenirs, eat out in restaurants, or treat themselves to a night at the theatre. Our industries go hand-in-hand.
There is a huge demand for UK travel and we must capitalise on that to avoid losing visitors to other destinations. The UK faces a serious risk of falling irretrievably behind our European neighbours. This has become even more pertinent since China reopened its borders and we’ve started welcoming back visitors arriving on airlines such as Air China and China Eastern.
A study by Oxford Economics surmised that the reintroduction of tax-free shopping would attract more than 1.6 million extra visitors to the UK in 2025/26 and stimulate an extra £2.8 billion of tourist spending.
The policy has been considered as Chancellors have chopped and changed since January 2021. There was a brief period when HM Treasury, under ex-Chancellor Kwasi Kwarteng, committed to bringing back tax-free shopping as a means of kickstarting the economy.
Whilst there was debate around the means, decision-makers in Whitehall largely agree on the need to increase productivity and activity in the economy post-COVID. But yet still the policy remains in place, causing ongoing damage to the aviation, travel and tourism, and travel retail sectors.
We speak with one voice
- Back in April this year, the UKTRF wrote to the Chancellor, laying out these points and calling for tax-free shopping to be reinstated.
- My colleague – London Gatwick’s Head of Retail, Nick Williams – appeared on BBC South East and BBC London in May, explaining the benefits.
- In June, hotel owner Sir Rocco Forte organised his own letter – signed by more than 300 leading businesses – to Chancellor Jeremy Hunt.
- The Daily Mail has launched its own ‘Scrap the Tourist Tax’ campaign.
- Parliamentarians will even debate this issue not once, but twice in one week when Parliament returns from summer recess, thanks to the work of Henry Smith MP, Sir Geoffrey Clifton-Brown MP and the Future of Aviation Group of MPs and Peers (see our story here).
The sector and business organisations speak with one voice when we call on the Chancellor to reinstate the scheme in his Autumn Statement. The Chancellor can and must be bold – taking this action will enable us to compete more effectively with our European counterparts, support retail jobs and add economic value for airport communities. We urge Mr. Hunt to consider the holistic benefits to both the economy and to UK plc. 
