The decline is equally evident in international tourism: over 90% of companies report a significant drop in foreign visitor spending, while 96% note that much of this purchasing power is being redirected towards European cities such as Paris and Milan. These figures come at a time when the global tourism market is performing strongly, with international travel spending expected to reach $2.1 trillion in 2025.
On top of the difficulties caused by the elimination of the scheme, new fiscal challenges such as rising employer contributions are adding further pressure to operating costs. Together, these factors have forced businesses to consider staff cuts or even rethink their expansion strategies.
The government’s response has not eased retailers’ concerns. Although a Treasury spokeswoman expressed optimism about international tourism — and announced a new stimulus strategy aimed at attracting 50 million international visitors annually by 2030 — the reality is that the current system only allows VAT refunds on goods shipped directly to the visitor’s home country, a process that many consumers find impractical.
In this context, NWEC and other business organizations insist that reinstating the tax-free scheme would be an effective economic measure, low-cost for the state, and with a direct impact on the competitiveness of the retail sector. Reintroducing the incentive would not only help recover sales but also preserve jobs and stimulate new investment.
Several players in the luxury sector have taken these demands into the political arena. Watchmakers, jewelers and high-end fashion brands have collectively addressed the Treasury, arguing that the absence of tax-free shopping has altered the behavior of high-spending tourists and weakened London’s appeal as a shopping destination. Some have reported sales growth in other European capitals where VAT refunds remain available. For instance, companies such as Hirsh London and Watches of Switzerland have recorded sharp declines in international sales — from 30% to as low as 4% in some cases when comparing 2019 to 2024 — while others, such as Tag Heuer, have seen clients shift their purchases to France, Italy and Switzerland.
Organizations like Walpole, which represents British luxury brands, also argue that restoring VAT refunds would be a key tool in regaining competitiveness against European destinations, particularly in a context of rising international trade tensions and tariffs. Nevertheless, the Treasury maintains that it has no immediate plans to reintroduce the scheme, favoring other avenues for economic growth.
The clear and unanimous message from affected stakeholders is that scrapping tax-free shopping has proven to be a costly decision. The retail sector of the West End — together with hotels, restaurants and entertainment — is now facing a critical moment. According to the data, reinstating the tax-free benefit stands out as a valid, feasible and strategic move to revitalize the economic dynamism of one of the country’s greatest attractions.
