Tax-Free Shopping Would Guarantee London As Top Luxury City, Industry Body Says

UK luxury industry body Walpole has once again called on the government to reinstate a tax-free shopping scheme for international tourists following the UK’s departure from the European Union.

In its inaugural State of London Luxury report, in partnership with landlord Cadogan, it claimed that the loss is “a drag on both London’s and the UK’s economic performance”, costing the country £4.1B annually.

“Every passing year without the scheme entrenches the view of London as a costlier place to visit and a less competitive place to do business," the report says.

The tax break was removed after the UK left the EU. It was brought back and then swiftly removed during successive government budgets, leaving critics to claim that London has been left at a huge disadvantage to luxury city rivals such as Paris and Milan. 

Citing the impact on visitor spending, Walpole said that in 2022, U.S. visitors spent at 101% of 2019 levels in London, but at 226%, 206% and 190% in France, Spain and Italy, respectively.

“If a next-generation tax-free shopping scheme could be introduced, London’s status as the world’s number-one luxury city would be guaranteed,” Walpole CEO Helen Brocklebank said.

The return of the policy would “be a windfall for the whole UK, including London”, and would add £4.1B to the UK economy and create an additional 78,000 jobs, according to Walpole’s research.

High-end tourists in London are estimated by Walpole to outspend mass tourists by 14 times per trip and double that of high-end visitors to other European cities, and the opening of 12 new five-star hotels between 2022 and 2025 should continue to attract more high-end visitors.

Beyond Bond Street — which has seen some high-profile retail departures — and Mayfair, Walpole said that affluent villages such as Connaught Village, Marylebone Village, Little Venice and Shoreditch offer hyperlocalisation and trend-led retail that have positioned London “as a global leader in growth and investment”.

Walpole and Cadogan also called on the government to extend the Electronic Visa Waiver to other high-spending markets beyond Gulf countries, particularly the Far East. Likewise, it said a joint UK-Schengen visa would significantly reduce the complexity for international visitors.

The report was launched on 15 May as part of Walpole’s annual conference, where Director Charlotte Keesing described the UK’s position outside the European visa system and the lack of tax-free shopping as a “significant drag on recovery”.

Meanwhile, Heathrow Airport Retail Director Fraser Brown warned of examples of wealthy visitors staying in London but travelling to city rivals Paris and Milan to shop.

In a sign that there may be some government movement, Trade Minister Nigel Huddleston has reportedly asked for more “information and data” on the impact of the decision to remove tax-free shopping.