U.K. Retail Dismayed As Tax Free Shopping Scrapped After Just Three Weeks

The U.K. retail industry has reacted with dismay after the reversal of a tax free Government policy that it says could cost the sector $1.36 billion.

More to the point, it’s a policy that was mysteriously scrapped as part of Brexit on January 1 2021, but was set to be reintroduced after an announcement made little more than three weeks ago.

But today, as the British government lurches from one crisis to another, the new Chancellor of the Exchequer Jeremy Hunt has ripped up a raft of plans made by recently ousted Chancellor Kwasi Kwarteng, who was sacked after 38 days in the job.

Just three weeks ago Kwarteng reintroduced tax free shopping for overseas visitors to the U.K. as a small element of a radical new financial plan but his wider ‘mini-budget’ immediately saw financial markets plunge Sterling into turmoil.

The British government has been trying to stabilize the economy ever since and luxury retail looks to be today’s big loser.

Tax Free Retail Scheme

The tax free scheme would have enabled overseas tourists to get a refund on the VAT [sales tax] paid on goods bought on the high street or in malls, at airports and other departure points, and exported from the U.K. in their personal baggage.

It would actually have been the reintroduction of tax free shopping policy, which was first scrapped on January 1 2021 as part of the Government’s Brexit plan.

Retailers were up in arms at the time, particularly those in tourist hot spots such as London’s embattled West End, who have long called for the return of the scheme, insisting that its loss had led to tourists choosing to spend their money elsewhere, notably in retail rival cities such as Paris and Milan.

Helen Dickinson, the chief executive of the British Retail Consortium, which represents most major retailers, said at the announcement of its reintroduction on September 23: “We welcome the reintroduction of tax-free shopping for tourists, which will boost sales and bring the U.K. back in line with other European nations.”

Now retailers are facing the scrapping of the tax free status and Helen Brocklebank, CEO of the organization representing the U.K’s luxury retail body Walpole, has spoken out about the reversal.

Walpole Cites $1.36 Billion Retail Cost

In a letter to Walpole members she said that she knows that they “share my profound disappointment” that the government has decided not to proceed with its policy to return tax-free shopping.

She said that it was a policy that would have quickly delivered growth to accelerate post-pandemic recovery and would also have been a significant boost to U.K. manufacturing.

Brocklebank added: “It’s a scheme that, as we are only too aware, supports jobs and investment the length and breadth of the country. What’s more, it is a policy that genuinely encourages growth whilst at the same time being a net contributor to the exchequer.”

Walpole estimates that the scheme could deliver direct retail sales of at least $1.36 billion as well as boosted associated spend across tourism and hospitality.

She added: “Walpole’s recent Bain study into high-end tourism [showed] that, until 2019, the U.K. had a unique advantage, and high-end international visitors to the U.K. spent 14x mainstream tourists, an injection of around £2,000 per person per day into our economy.

“Having become the only country in Europe without tax-free shopping was a significant impediment to post-pandemic recovery, risking our competitiveness, and risking stultifying a $34 billion industry.”

Brocklebank concluded: “As an immediate priority, we are asking the Government to do a full economic review, to understand the value that such a scheme might bring. Above all, we will seek to work closely with the new Chancellor to reach an outcome which supports the sector and the countless jobs and industries it supports.”