Tourist tax blamed for £1.3billion loss to the UK economy in Chinese visitor spending

The latest findings emerged as Prime Minister Keir Starmer visited Beijing, prompting renewed pressure from retail and hospitality leaders urging Labour to reinstate the scheme.

Industry figures say the removal of tax‑free shopping has severely hindered Britain’s post‑pandemic tourism recovery, leaving the UK at a clear disadvantage compared with European rivals.

AIR’s data shows Chinese visitor numbers to the UK reached only 82 per cent of 2019 levels last year, while Spain surged ahead to 121 per cent of its pre‑pandemic total.

The contrast is equally stark in spending patterns. Chinese visitors spent just 93 per cent of their 2019 total in the UK, a fall of £120million, while Spain recorded Chinese tourist spending at 156 per cent of pre‑pandemic levels and Italy at 169 per cent.

Had Britain matched Italy’s performance, the UK economy would have received an additional £1.18billion.

The Chinese market remains one of the most valuable in global tourism.

Chinese travellers overtook German and American visitors to become the world’s highest‑spending tourists in 2012, a position they still hold.

In 2019, they accounted for just eight per cent of non‑EU visitors, but generated 32 per cent of all tax‑free shopping transactions, spending £800 million on retail alone.

Derrick Hardman, chairman of AIR, delivered a blunt assessment of the consequences.

“This is yet more evidence that the UK has shot itself in the foot by scrapping tax‑free shopping for international visitors,” he said.

He noted that VisitBritain identifies shopping as the primary motivation for Chinese tourists, yet the UK has made itself far less attractive as a destination for their spending.

Mr Hardman warned the damage extends far beyond retail.

“This isn’t just hitting retailers, but everyone involved in the tourist economy, hotels, restaurants, pubs, visitor attractions, transport and so on,” he said, urging ministers to conduct a full review of the policy’s wider economic impact.

The effects ripple through regional tourism hotspots and manufacturers supplying the sector.

More than 500 business leaders, including Giorgio Armani, Pernod Ricard and the owner of Westfield shopping centres, have now joined calls for a policy reversal, arguing that the economic benefits of attracting high‑spending international visitors far outweigh the cost of VAT refunds.

The situation stands in sharp contrast to official expectations at the time of the policy change.

The Conservative Government’s 2020 impact assessment predicted “little or no impact on visitor numbers or spending levels” from ending tax‑free shopping for non‑EU visitors. The latest evidence suggests the opposite.