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Loss of tax-free status more harmful to West End businesses than cost-of-living crisis

Sophie Smith
07 September 2023

The absence of tax-free shopping has negatively impacted the majority of West End businesses, according to New West End Company.

A survey of retail, hospitality, leisure and F&B businesses in the district found that 92% of respondents have been affected by the loss of the VAT Retail Export Scheme (VAT RES).

The data also revealed that businesses were taking proactive measures to mitigate the impact of tax-free shopping.

54% confirmed their business was reviewing future UK investment strategies, with 48% reconsidering staffing requirements to manage costs.

Shoppers on Oxford Street // footfall

Of those affected by the ‘tourist tax’, 72% reported a fall in the overall numbers of visitors, whilst 89% reported a decrease in spending by international visitors.

In addition, 21% of those polled said they were considering UK closures or reallocating capital to other countries as a result of the 'tourist tax'.

New West End Company said the findings confirm that the introduction of an effective 20% premium on tourist spending in London has had a damaging impact on West End businesses, and is likely to have a long-term effect on UK investment and employment as a result.

The research also supports recent forecasts from the Centre for Economics and Business Research that removing the tourist tax would bring in up to £10 billion extra a year to the British economy and encourage investment into the UK.

Dee Corsi, CEO of New West End Company, said: "Speaking to our members, it is clear that the impact of the ‘tourist tax’ is far reaching, affecting retailers, hospitality, F&B and leisure providers.

"Our research shows that it is proving more of a concern than the cost-of-living crisis and inflation – an unnecessary barrier to growth that UK businesses do not need in an already challenging economic environment.

"The Treasury has the opportunity to reinstate tax-free shopping, with a net positive effect on government tax revenues, and providing a much-needed injection of growth into the economy.

"It would encourage businesses to continue to invest in the UK, safeguard existing jobs and create a more competitive trading environment."

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