Badenoch pledges to bring back tax-free shopping for tourists

Kemi Badenoch has pledged to bring back tax-free shopping for tourists by reversing a post-Brexit rule change.

The decision to scrap the VAT refund scheme for international visitors in 2021 left the UK “less competitive” than many other European destinations as the country left the EU, the Tories said.

The Opposition leader, who was a Treasury minister at the time of its abolition, said retailers were being “let down by a policy that is driving their customers away”.

Business chiefs including the bosses of Fortnum & Mason, Paul Smith and the parent company of Claridge’s hotel hailed the policy change as “pro-growth” and “pro-jobs”.

Visitor numbers to the UK have returned to near pre-Covid levels, but real-terms spending remains 8% lower than before the pandemic, according to estimates from tourism agency VisitBritain based on data from 2024.

The Tories said returning the VAT refund would be partly offset by a proposed “crackdown” on so-called “health tourism”, including more consistent charging of patients ineligible for free treatment.

Tax-free shopping could also be extended to cover EU tourists subject to evidence, with the rollout complete by the end of the next Parliament, the party said.

In a joint statement backing the pledge, business leaders said: “As some of the leading businesses in tourism, retail and hospitality, we welcome this pro-growth, pro-jobs announcement from Kemi Badenoch and her team.

“With its heritage and the quality of our products and service, Britain is well placed to compete with the world’s finest destinations. The restoration of tax-free shopping for tourists will allow us to win back those who may have taken their custom elsewhere in recent years. When taking the full economic benefits and other taxes paid into account, we believe this will be a net benefit to Britain.”

The business leaders are: chef and TV personality Angela Hartnett; co-founder of Inception hospitality group Charlie Gilkes; ME+EM CEO Clare Hornby; Burlington Arcade Managing Director Jamie Reuben; Marc Socker CEO Maybourne, which owns and manages The Berkeley, Claridge’s, The Connaught and The Emory hotels; Paul Smith Executive Chairman Ewan Venters; Fuller, Smith and Turner Executive Chairman Simon Emeny; and Fortnum & Mason CEO Tom Athron.

Badenoch said: “Britain should be the place where the whole world comes to shop.

“We have iconic retailers, inventive designers and brilliant manufacturers, but they are being let down by a tax policy that is chasing their customers away. Holidaymakers are choosing rival cities in other countries for the simple reason that it saves them money.

“British retailers are closing down shops with the knock-on effects damaging small manufacturers, suppliers and jobs across the UK. I want them to know I’m on their side and Conservatives will sort out taxes so companies can create jobs and grow our economy.”

Labour accused the Tories of a “spectacular U-turn” over the policy pledge.

“Kemi Badenoch used to say tax-free shopping was a costly giveaway and now she’s trying to sell it as an economic miracle,” a party spokesperson said.

“If they really think it’s such a great idea, they should explain why they scrapped it in the first place and how they’d pay for bringing it back.”

A Treasury spokesperson said: “The UK is one of the most-visited countries in the world with international tourism driving billions into our economy. We are supporting the continued growth of this industry and the Government is working to meet our ambition to welcome 50 million international visitors a year to the UK by 2030.

“Visitors can still claim VAT relief where the items purchased are shipped directly to their home country as exports.”

The move comes after Burberry urged Prime Minister Andy Burnham to reinstate tax-free shopping for overseas visitors, arguing the move would help revive luxury retail spending and strengthen the UK’s fashion industry, including Burberry's northern manufacturing facilities.

Burberry CEO Joshua Schulman said the luxury brand’s tourist business has fallen by around 50% since 2019, which he attributed largely to the abolition of the VAT Retail Export Scheme in 2020.

Jigsaw owner David Ross said the abolition of tax-free shopping had far reaching consequences beyond the capital and luxury retail and hospitality. "People talk about tax-free shopping as if it only matters to a few streets in the West End. As the owner of Jigsaw I can tell you it doesn't. It helps stores nationwide. Bath, York, Harrogate, Milton Keynes, Edinburgh, Brighton. Every high street in every town that welcomes international visitors, with spin-offs to the hotels, restaurants and suppliers around them. Shopping is a competitive business. For five years we have sent the world's shoppers to Paris and Milan - then we wonder why our high streets are struggling. It's crazy.

"Britain should be the shopping capital of Europe. Bringing tax-free shopping back is a compelling statement that we are open for business and want the international community back. It pays for itself too. For every £1 refunded, another £1.54 comes back in other taxes. In time it can work for Europeans too, who want to come for long weekends to enjoy our culture and our shopping. This announcement shows that Kemi Badenoch and the Conservative Party are the only political force that understands how to support our high streets and grow our economy," Ross said.