Jeremy Hunt scores "own goal" by failing to reinstate tax-free shopping

Retail industry figures have hit out at Jeremy Hunt's failure to reintroduce tax-free shopping for travellers to the UK, saying the Chancellor has scored an "own goal" given the positive impact the measure would have on the UK economy.

Prime Minister Rishi Sunak scrapped tax-free shopping for travellers to the UK in 2020, when he was Chancellor, and the Government has resisted a repeated requests from retailers and luxury industry figures to re-instate the scheme.

There had been some hope that Hunt would announce a u-turn in the Spring Budget today but the industry was left disappointed. A recent study by the Office for Budget Responsibility suggested the decision to scrap the tourist benefit was made only on the basis of the goods that would incur VAT and did not take into consideration the wider benefit that tourist spend brings to the UK, such spend across the wider retail market and within hospitality.

Retailers also argued that by not offering VAT-free shopping, the UK has effectively introduced a "tourist tax" and has handed a large chunk of international tourist spend to major European destinations such as Paris and Milan.

However the Government has said it was still not persuaded of the benefits of re-introducing the scheme.

“The government is grateful to the OBR for their review of the original costing of the removal of tax-free shopping. The government will consider these findings alongside industry representations and broader data, and welcomes any further submissions in response to the OBR’s findings," the Government said in its Red Book today.

Helen Brocklebank, Walpole

Helen Brocklebank, CEO at Walpole, the official sector body for UK luxury representing brands like Burberry, Harrods and Claridge’s and Jo Malone London said of the decision: “Despite plenty of rhetoric about boosting productivity and foreign direct investment, Chancellor Jeremy Hunt scored a huge own goal at today’s Spring Budget by not scrapping the 'tourist tax'. It’s a massive missed opportunity to unlock the power of this much needed growth driver for the country.

"By reintroducing VAT-free shopping for international visitors, policymakers could cement Britain’s position as a world-renowned shopping destination, encourage more inward investment and support hundreds of thousands of jobs across regional supply chains. Instead, retailers may now struggle to keep pace with continental competitors; British retailers, including luxury brands, are estimated to already be losing £1.5bn per year as international visits opt to spend in France, Italy and Spain, where tax-free shopping schemes remain in place.”

Along with Walpole's Brocklebank, New West End Company CEO Dee Corsi, has been a leading campaigner for the re-instatement of tax-free shopping. Corsi said: “Today’s announcement is incredibly disappointing and at odds with the real-world data which has been shared by businesses, airports and regional groups across the country.

“It also comes against the backdrop of what is already perfect storm for larger retail businesses in particular, who face both a costly end to business rates relief and an imminent increase to the national living wage in the months ahead.

“It is concerning that, whilst our EU counterparts actively leverage tax-free shopping as a means to supercharge growth, we are unable to see the policy’s potential – not just for retail, but for hospitality, leisure and cultural attractions across the nation.

“Put simply, the Chancellor has missed yet another opportunity to inject some growth into the UK at a time when we need it most and it is British businesses, and their employees, who will feel the impact most.”

Scott Parsons, Chief Operating Officer, UK at Unibail-Rodamco-Westfield, described the Budget as "an utter disappointment" with no significant announcements on business rates relief as well as no u-turn on tax-free shopping.

“These are clear missed opportunities especially in this all-important election year.

"It's deeply frustrating that calls from over 500 sector leaders to halt the tourist tax have been ignored, despite the compelling data which demonstrates the critical importance of tax-free shopping for the UK economy.

“What’s more, the existing business rates system places our high streets at a massive disadvantage compared to those in other European cities, with UK retailers shouldering a financial load nearly ten times more than brands on the continent. Permanently lowering rates is the most meaningful way to support the sustainable, long-term growth of the retail industry and show the world once and for all that the UK is open for investment.

“While Hunt has failed to deliver for the industry, in contrast, the Labour Party’s newly unveiled strategy to revitalise Britain's high streets holds great promise. By pledging to overhaul the outdated business rates system, Labour is signalling a more encouraging future for the sector.”