The scrapping of VAT-free shopping for international visitors has cost London’s West End £310 million in lost sales during the first half of 2025, according to new research.
The figure represents a 40 per cent rise on the £220 million recorded for the same period last year, and is the largest six-month loss since the scheme was abolished by the Conservative government in 2021.
Analysis by the New West End Company (NWEC), which represents 600 businesses across Bond Street, Oxford Street, Regent Street and Mayfair, estimates that the ban has drained around £1.4 billion in sales from the district since 2023.
Dee Corsi, chief executive of the NWEC, said higher taxes and wage costs were “compounding the pressure” on luxury retailers already hit by the end of the VAT rebate. A survey of members found that 75 per cent are reviewing staffing levels, while half are reconsidering investment in the UK. More than 80 per cent said the loss of tax-free shopping has directly damaged their trading performance.
“Tax-free shopping presents a rare, low-cost opportunity for the government to back Britain’s near-term growth, create jobs, and give our businesses their competitive edge once more,” Corsi said. “Not only is the scheme understood by global consumers, it is backed by business. The time to act is now, before the window of opportunity closes.”
The VAT rebate allowed overseas visitors to reclaim 20 per cent VAT on purchases, giving London a competitive advantage against rival shopping hubs. Since its removal, retailers warn international shoppers are diverting their spend to European cities.
More than 90 per cent of West End businesses surveyed reported lower footfall and spending from foreign visitors, while 96 per cent believed Paris and Milan are benefiting directly. The concerns come as global international visitor spending is forecast to reach $2.1 trillion in 2025, surpassing pre-pandemic highs.
The decision to axe the rebate has been branded by some industry figures as an “act of economic self-harm.” In March, culture secretary Lisa Nandy suggested the government could revisit the scheme, but no firm commitment has been made.
An HM Treasury spokesperson said the UK remains one of the world’s top tourist destinations and confirmed that a new National Visitor Economy Strategy will be launched this autumn, with the ambition of welcoming 50 million international visitors a year by 2030.
“Visitors can still claim VAT relief where the items purchased are shipped directly to their home country as exports,” the spokesperson added.
With British retailers already under strain from higher payroll taxes, rising wages and fragile consumer confidence, industry leaders argue that restoring tax-free shopping could provide an immediate boost to jobs and competitiveness – and stem the flow of tourist spending to Europe.