How the loss of tax-free shopping cost London’s West End £640m

The lack of tax-free shopping's impact on British retail has been apparent since it was scrapped in 2020. However, this has come to a head after data revealed that London’s West End retailers have lost an estimated £640 million across FY24, up from £400 million in FY23, thanks to unrealised international visitor revenue.

Despite the potential loss, the West End demonstrated resilience, reporting growth of 0.25% year-on-year over the festive period (November and December 2024).

Domestic spend declined during the festive period by 2.2%. In contrast, international spend across the festive period rose by 3.5% year-on-year. Visitors from the US, Saudi Arabia, and Germany emerged as the top international shoppers.

International spend was, however, still below pre-pandemic levels, impacted by the removal of VAT-free shopping and putting London at a competitive disadvantage against other European cities. In continental Europe, where tourists enjoy up to 20% savings on purchases, data from Global Blue reveals that issued sales in store in Europe surged by 16% in November and 20% in December. The UK was unsurprisingly significantly behind this.

As domestic spend lowers, the economic potential of international visitors remains party untapped. So, the New West End Company has urged to government "evolve" the policy "quickly" to support business stability and meaningful growth for London’s retailers.

Dee Corsi, Chief Executive Officer of New West End Company, said: "Our latest data reaffirms the West End’s status as a world-class destination for retail, leisure and hospitality particularly during the festive period. However, challenging economic headwinds and policy inertia are holding us back. International visitors are eager to spend, at a time when domestic spend is declining, but without a robust tourism strategy, we are losing out to our European competitors – to the tune of £640 million in a year.

"The Government has just announced support for Heathrow’s third runway. And yet policies like lack of tax-free shopping remain stumbling blocks in their growth agenda. We need bold action to unlock the full potential of international spend, if we are to recover to pre-pandemic levels and achieve growth."

Heathrow’s Chief Executive Thomas Woldbye corroborated this when he said the loss of tax-free shopping is stopping the "UK aviation’s ability to compete globally".

Corsi concluded: "If the Government is serious about protecting high streets and driving investment, now is the time to act before the growth window narrows even further."