What: Research indicates that reintroducing tax-free shopping would boost UK retail sales and tourism, potentially reversing the £640 million revenue loss experienced by London's West End in the past year.

Why it is important: The study underscores the broader economic implications of tax-free shopping policy, affecting not just retail sales but also tourism, hospitality, and the UK's overall attractiveness as a destination for high-value international visitors.

The potential reintroduction of tax-free shopping in the UK represents a significant opportunity for economic growth across multiple sectors. Current data shows London's West End suffering a substantial £640 million revenue loss due to the absence of tax-free shopping, despite increased international visitor numbers. This disconnect between footfall and spending power highlights the policy's direct impact on retail performance. The situation is particularly striking when compared to competing markets, where retailers are experiencing substantial growth in tourist spending. The research suggests that restoring tax-free shopping could not only recover lost revenue but also stimulate broader economic benefits through increased tourism and hospitality spending. This policy change would be especially crucial for luxury retailers and department stores, which have historically benefited from international visitor spending and currently face increased competition from other global shopping destinations.

IADS Notes: Recent market developments highlight the stark contrast between countries with and without tax-free shopping policies. In March 2025, Norway's Steen & Strøm reported a remarkable 122% increase in tax-free sales, while Japanese department stores saw an 85.9% surge in duty-free sales throughout 2024. Meanwhile, London's West End experienced just 0.25% growth during the crucial November-December 2024 period, with domestic spending declining by 2.2%. This performance gap is further emphasised by February 2025 data showing how competing destinations like Paris are benefiting from the UK's policy void. The success of retailers in markets maintaining tax-free shopping demonstrates the significant potential economic impact of reintroducing this policy in the UK, particularly as global luxury tourism continues to recover and evolve.

Restoring tax-free shopping would deliver multi-billion pound sales boost