This weekend the UK will host a spectacle that will be watched by millions across the globe — the landmark occasion of the King’s Coronation. Many will have only seen fictional adaptations on Netflix, as this is the first time in seventy years that people have had the chance to see history being made in the capital. That’s why visitors from the UK and beyond will descend on London in to soak up the atmosphere.
The Coronation will provide a much-needed boost for London’s leisure, hospitality and retail businesses badly hit by the pandemic. However, despite the scale of the occasion, we are not doing everything we should to attract high-spending visitors to this historic event or to maximise London’s attractiveness to overseas tourism, which, in turn, will support jobs and growth. In 2019, according to Visit Britain, tourism in England contributed £106 billion to the British economy (GDP) and supported 2.6m jobs.
After Brexit, the Government inexplicably decided to stop overseas visitors from being able to reclaim VAT on goods purchased here and then taken home. This puts us at an enormous competitive disadvantage to the EU. Americans, Chinese, and Indian visitors — you name it — to continental European countries can claim back VAT when they leave. As can we Brits. But no visitors to the UK can.
We are seriously losing out as a result. Figures from Global Blue show that 10% of UK spending by international shoppers in 2019 has now moved to EU countries, which have kept VAT-free shopping for goods.
We are also lagging behind other European cities in attracting visitors from key markets. For example, spending by American shoppers in the UK is now back at 2019 levels, demonstrating a welcome recovery from the dark days of the pandemic. But our figure lags starkly behind France, Spain and Italy, which have virtually doubled their American spending, and it is a similar story for the Gulf and China.
This is an issue that matters for the whole of the UK’s flatlining economy. A week after the Coronation, Liverpool will host the music industry’s biggest night – the Eurovision Song Contest. The event is predicted to be worth around £25m to the regional economy, and lessons from the previous host cities show the impact doesn’t stop when the points have been allocated. Last year, for example, Turin’s hospitality sector made seven times what the city spent on hosting (£10m), with nine out of 10 saying they’ll be back for a second visit.
Events like this in the UK would attract even more international visitors that would help turbocharge our economy if we brought back VAT-free shopping. By doing so, it would strongly support growth, generate £4.1bn GVA annually, and create 78,000 jobs, according to Oxford Economics.
Re-introducing the scheme would boost spending from visitors and more than compensate for the short-term loss of VAT receipts – delivering an extra £350 million in tax revenues for the Exchequer every year. This would ultimately be a win-win for business, the economy and the country.
The Paris Olympics will take centre stage next summer. And Britain is competing in the global race for tourism with our shoelaces tied together. We must act now to restore VAT-free shopping so that we are an attractive hop across the Channel for visitors to the games and more broadly.
The Government missed a trick by failing to seize the opportunity to bring back VAT-free shopping for international visitors ahead of the Coronation. We need to act now to show the world that Britain is open for business.
This article first appeared in the Daily Mail on 4 May