Business Leaders Demand Tourist Tax Scrap to Revitalise UK High Streets
Leading business groups have issued a direct appeal to Prime Minister Keir Starmer, calling for the immediate scrapping of the controversial tourist tax to deliver a substantial £7 billion annual boost to Britain's struggling high streets. The urgent plea comes from prominent trade organisations including the Heart of London Business Alliance, the Association of Town and City Management, and the Association of International Retail, who collectively represent thousands of businesses across the retail and hospitality sectors.
VAT-Free Shopping Scheme as Economic Catalyst
In their comprehensive letter to the Prime Minister, the three influential groups have presented compelling evidence that reinstating a VAT-free shopping scheme for international visitors would fundamentally reposition Britain as Europe's premier shopping destination for tourists, investors, and retail brands. The business leaders argue that this strategic move would not only stimulate economic growth but also create a competitive advantage that has been sorely lacking since the scheme's abolition.
The detailed analysis from the Association of International Retail, which represents major destinations including Bicester Village and Heathrow Airport, reveals that reintroducing the 20 percent VAT refund scheme would generate an impressive £7 billion in additional annual revenue while supporting approximately 140,000 jobs nationwide. This substantial economic injection comes at a critical time for high streets facing unprecedented challenges from changing consumer habits and economic pressures.
Recapturing Lost Revenue and Expanding Markets
The business groups highlight a particularly concerning trend: an estimated £2 billion that currently flows from UK high streets to European Union destinations each year. By eliminating the tourist tax, Britain could successfully recapture this substantial revenue stream that currently benefits competitor nations including France, Italy, and Germany. Major retailers including Harrods, Primark, Marks & Spencer, and luxury brands Burberry and Mulberry have all publicly endorsed the campaign to restore tax-free shopping.
Furthermore, the organisations project that scrapping the tourist tax would unlock a completely new EU shopper market potentially worth £5 billion annually. This projection is based on achieving spending levels comparable to British tourists' expenditure in EU shops, hotels, pubs, and restaurants during the previous year. The unique opportunity arises from Britain's departure from the EU customs union, which now enables the UK to offer VAT rebates to 450 million EU residents alongside high-spending visitors from China and the United States.
Fundamental Business Rates Reform Required
Alongside their call for tourist tax abolition, the business leaders have delivered a stark assessment of the current business rates system, describing it as fundamentally broken and in urgent need of complete structural reform. They argue that a comprehensive overhaul would provide an additional £2 billion boost to high streets across the country, addressing what they identify as systemic disadvantages facing physical retailers compared to online competitors.
The groups have proposed a radical solution: introducing a modest 2 percent levy on all online sales, which would enable a substantial 35 percent reduction in all business rate bills. This innovative approach aims to create what they describe as a fairer, level playing field between traditional high street businesses and digital trading platforms. Their proposal comes as familiar retail names including River Island, Claire's Accessories, and Poundland have announced shop closures and job cuts in recent weeks, highlighting the severe pressures facing the sector.
Industry Backing and Political Context
More than 500 prominent UK business leaders have now publicly backed the campaign to restore the VAT refund scheme, adding significant weight to the growing movement for change. The business groups have specifically urged the Government to commit to a full impact review of tax-free shopping, describing this as a cost-free demonstration of support that would be widely welcomed across the business community.
Their urgent plea arrives alongside warnings from Britain's leading restaurateurs, hoteliers, and chefs that current tax policies risk driving numerous additional businesses into closure, potentially leaving town centres increasingly desolate. The concerns follow recent controversy surrounding business rate increases for hospitality and retail sectors, which prompted more than 1,500 venues to ban Labour MPs from their premises in protest.
Helen Dickinson, Chief Executive of the British Retail Consortium, emphasised the critical importance of addressing these issues: The high street remains the centre of our communities, and the Prime Minister has spelled out the challenge of boarded up shops and gap-toothed high streets. This not only harms community pride but limits employment opportunities and economic growth made possible by a thriving high street.
Dickinson added a stark warning about business rates: This tax is the final nail for thousands of boarded up shops, and a key factor when deciding whether to open new stores or close existing ones. If Government wants local neighbourhoods to thrive long into the future, it must make good on their promise for meaningful reform of the broken business rates system once and for all.
