Why the Chancellor Should Review the Impact of VAT-Free Shopping
Leading businesspeople are calling on Chancellor John Healey to announce a review in the Autumn Budget
Wednesday 2 September 2026.
Our latest commissioned research, from the Centre for Economics and Business Research (Cebr), finds that restoring VAT-free shopping for international visitors could:
- Add £11.5bn in additional GDP and support more than 153,000 jobs
- Deliver a £2.6bn net gain to the Exchequer.
- Attract up to 2.35 million additional international visitors each year,
The findings make a strong case for the Government to review VAT-free shopping and its potential to support economic growth, particularly as the UK continues to lag behind other European destinations in recovering visitor spending following the pandemic. The removal of VAT-free shopping has left the UK as the only major European country without such a scheme.
Cebr estimates that restoring VAT-free shopping could generate £4.1bn in additional tourism spending and £4bn in additional tax receipts, alongside the wider economic benefits to GDP and employment.
The findings come as more than 500 business leaders have signed an open letter to Chancellor John Healey calling for the Government to review the policy ahead of the Autumn Budget on Wednesday 28 October 2026.
Why this matters to the West End
These findings are particularly relevant to businesses in the West End, an important part of the UK’s visitor economy. Retail is a core sector in the Heart of London area, accounting for 34% of occupied commercial space. This rises to 73% on Jermyn Street and 60% on Piccadilly.
The performance of international visitors therefore matters not only to retailers, but also to the wider network of hospitality, cultural, leisure and other businesses that benefit from visitor spending. Members can explore further economic and area-based insights in HOLBA’s Data & Insights Hub.
A policy change hidden by the pandemic
VAT-free shopping was removed in Great Britain in January 2021, when international travel and visitor spending had collapsed because of the pandemic. With international tourism now largely recovered, the report compares the UK’s visitor spending performance with that of competing European destinations, providing a clearer picture of the competitiveness gap that has emerged since the scheme was removed.
The same gap between visitor numbers and visitor value can be seen in the Heart of London area. While annual visitor numbers surpassed pre-pandemic levels in 2025, visitor spending has yet to recover to the same level.
Our report finds that, while international visitor numbers have broadly returned to pre-pandemic levels in the UK, spending has not. Overseas visits in 2024 were just 1.3 per cent below 2019 levels, yet real visitor expenditure remained 8.7 per cent lower. Average spending per visit also fell, from £848 in 2019 to £786 in 2024.
The gap is even greater among non-EU visitors. By 2024, real spending by this group had recovered to only 88.6 per cent of its pre-pandemic level, compared with 96 per cent among EU visitors.
The Mayor of London's response:
"London is a globally renowned tourist destination, but the decision to remove tax-free shopping by the previous Government was a huge mistake which has led to us trailing behind other European cities on visitor spending for too long.
"This report highlights how reintroducing tax-free shopping would entice millions more additional international visitors to the UK each year, providing a multi-billion boost to the economy, supporting thousands of jobs and generating more money for the public purse.
"With growth at the top of this Government’s agenda, and the evidence showing that the benefits would extend beyond retail to every part of the economy, the Government should consider using the Autumn Budget to reinstate tax-free shopping and make it clear to the world that London and the UK are open for business."
A post-Brexit opportunity for Britain
The report also highlights a major new opportunity created by Brexit. Under World Trade Organisation rules, a restored scheme could be extended to EU visitors as well as non-EU visitors, making Britain the only major European destination able to offer tax-free shopping to both markets.
Call for change
Our 2026 member survey shows that VAT-free shopping remains an important issue for businesses across the Heart of London area, with 20% of members identifying it as an issue to tackle.
The call for change extends beyond our members, with businesses across London also calling for action. More than 500 business leaders have now signed an open letter to the Chancellor describing the abolition of VAT-free shopping as a “spectacular own goal” for the UK economy.
Signatories include
| British Airways | Primark | Lord Lloyd Webber |
| Marks & Spencer | Harvey Nichols | The Royal Opera House |
| Heathrow Airport | Bicester Village | The Royal Academy of Arts |
| Gatwick Airport | The British Fashion Council | Shakespeare's Globe |
| Burberry | UKHospitality | Tate |
| Mulberry | Victoria Beckham | Rocco Forte Hotels |
Do you think that VAT-free shopping should be reintroduced? Let the Government know and add your name to the letter.
UK impact of reintroducing tax-free shopping in 2025:
Why VAT-free (tax-free) shopping should return:
"This report provides the most compelling evidence yet that restoring tax-free shopping represents a major opportunity to boost economic growth, create jobs and generate additional revenue for public services.
"The UK's tourism sector remains one of our greatest economic assets, yet we have made ourselves less competitive than every major European rival. While Paris, Milan and Madrid continue to welcome high-spending international shoppers with tax-free incentives, the UK has effectively put up a 'closed for business' sign.
"The consequences are visible in the data. Visitor numbers may have largely recovered, but visitor spending has not. We are attracting fewer high-value international visitors and losing valuable spending to competitor destinations.
"At a time when economic growth is rightly the Government's top priority, restoring tax-free shopping is one of the clearest pro-growth measures available. We are asking the Treasury to at least commit to a proper review of its current position in the Autumn Budget. The evidence shows a change in policy would not cost the Treasury money - it would generate a substantial net benefit to the public finances while supporting businesses, jobs and investment across the entire UK."
"This report demolishes once and for all the argument that restoring tax-free shopping would be a cost to the taxpayer. The opposite is true. The Treasury would be significantly better off, the economy would be stronger and tens of thousands of jobs would be created.
"We now have overwhelming evidence that abolishing tax-free shopping was a serious mistake. The UK has become the only major shopping destination in Europe to deny international visitors a tax refund, and the result is entirely predictable: tourists are choosing to spend their money elsewhere.
"More than 500 leaders of Britain's leading businesses, hotels, retailers, airports and cultural institutions have united in calling for this policy to be reversed. The Government says it wants growth. Here is a proven, immediate and fiscally positive way of delivering it.
"The longer we delay, the longer our competitors continue to reap the rewards at Britain's expense."
"The removal of tax-free shopping has hit all parts of the tourist economy, including theatres. Its swift reintroduction is a no-brainer, as it will create jobs and bring about a net increase in tax revenue, as well as boosting regional economies across the UK. The sooner it is done, the better."
"Our analysis suggests that reintroducing tax-free shopping would increase both visitor numbers and spending by improving the UK's international competitiveness. The resulting increase in tourism activity would support significant economic output, employment and tax revenues throughout the wider economy.
"The findings indicate that the economic benefits would extend far beyond retail alone, supporting activity across hospitality, transport, accommodation, culture and tourism supply chains in every part of the country."
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We are actively campaigning for a Government review of VAT-free shopping policy on behalf of our members.