Anybody strolling by central London this month will see vacationers from everywhere in the globe taking within the Christmas lights amid the sound of bells jingling. But the tills will not be ringing as a lot as they need to be.
At a time when the UK financial system is caught in a low-growth rut, we must be pulling out all of the stops to draw high-spending guests and maximise the capital’s attractiveness to abroad tourism.
Perversely, we’re doing the other.
The Government inexplicably scrapped tax-free buying on items for worldwide guests in 2021.
This current to our European opponents was eagerly accepted: France now accounts for 46 per cent of all tax-free gross sales in Europe, up from 30 per cent in 2020.
Losing out: Figures from Global Blue present that 10% of UK spending by worldwide consumers in 2019 has now moved to EU international locations
And figures from Global Blue present that 10pc of UK spending by worldwide consumers in 2019 has now moved to EU international locations, which all provide VAT-free buying.
International guests right here successfully pay round 20 per cent extra for a similar items they’ll purchase elsewhere. And purchase elsewhere they do – in Paris, Milan and different cities.
Not solely does this imply that British retailers lose out, however the Exchequer misses out on the VAT from extra spending on motels, eating places and theatres.
Economists on the Centre for Economics and Business Research estimate that the tax is costing the UK £10.7billion in misplaced GDP and laying aside 2m travellers from visiting annually.
British retailers additionally say that London is dropping out as a buying hub to cities which provide VAT-free buying.
Organisations that symbolize round 1.5m workers throughout the nation just lately signed a BusinessLDN letter urging the Chancellor to abolish the vacationer tax.
The influence of the tax is felt proper throughout the nation and never simply in London’s world-leading outlets, motels, eating places and points of interest. Other cities are lacking out and provide chains additionally endure in consequence.
Mulberry closed its Bond Street retailer in London this yr: round half its luggage are made in Somerset.
Evidence reveals that worldwide guests sometimes purchase extra British items after they go to the capital, so the very fact they’re more and more selecting to spend in different international locations hits the entire UK provide chain.
The extra spending from reintroducing VAT-free buying on items for worldwide guests would ship a major internet improve in tax revenues.
It would additionally assist tens of hundreds of jobs throughout the nation: 78,000 of them, in accordance with Oxford Economics.
London’s standing as a driver for UK tourism is demonstrated by the dimensions of its contribution to the financial system.
Visit Britain information reveals that there have been 16.1m in-bound visits to London in 2022 in contrast with 13.2m visits to the remainder of England in 2022.
The capital acts as a gateway for journeys to different components of the UK, supporting progress and jobs. Next yr we stand to overlook out on the advantages of the close by Paris Olympics. Euromonitor International forecasts the Paris Games will create as much as 3m extra guests in Paris.
We must be doing all the things we will to encourage them throughout the Channel to spend right here, not deterring them.
This additionally means ensuring that proposed adjustments by the EU requiring extra information to be gathered at border checkpoints, comparable to Eurostar at St Pancras, are applied in a approach that doesn’t trigger prolonged delays.
It can be vital that the present rhetoric on immigration doesn’t create an impression that the UK has shut its doorways to abroad guests.
International tourism is a significant asset for our financial system however the additional VAT on items is encouraging our Christmas guests to maintain their palms of their pockets.
All shouldn’t be misplaced. By restoring the scheme, the Chancellor can improve the Government’s ambition to put progress on the coronary heart of Britain’s financial system.
We should make this the final Christmas when the vacationer tax damages the UK’s financial pursuits.
It shouldn’t simply be bells which are ringing in future.