London witnessed the return of Chinese tourists following the easing of travel restrictions, though their expenditures are notably lower compared to pre-pandemic levels, marking a significant 58 percent decrease.
The New West End Company (NWEC), representing stores and hotels in the London district, observed a growing awareness among tourists regarding the end of tax-free shopping in the UK post-Brexit, VisaGuide.World reports.
Consequently, visitors are redirecting their purchasing activities to other European destinations.
No tax-free shopping is a major disadvantage in the competition to attract high-spending international visitors.
Ward emphasized that the impact extends well beyond the retail sector in London.
The shift in consumer behavior has resulted in a scenario where sales fail to ascend proportionally despite the increasing numbers to the British capital.
In 2021, only 17,000 Chinese visitors made it to the UK due to various restrictions and canceled flights, with an increase to 73,000 in 2022. In September 2022, the number of Chinese visitors to London was just two percent below the figures recorded in 2019.
Despite the relatively close return to pre-pandemic visitation levels, their expenditures significantly declined.
Widening from a one-percentage-point difference in the first quarter to 31 percentage points in the third quarter, the contrast between the total number of international visitors and their expenditures in the capital, compared to 2019, became more pronounced.
A significant majority, constituting three-quarters of international visitors to the West End, expressed their willingness to increase their spending if given the opportunity to reclaim the 20 percent value-added tax (VAT) on their purchases.
Until January 2021, visitors from outside the EU could reclaim the tax paid on their spending, a policy that has since expired.
Despite delivering exceptional experiences and products, the absence of tax-free shopping is hindering growth and impacting consumer spending.
Corsi noted that continental Europe is benefiting from the UK tax decision, with a notable surge in spending recently observed in France and Spain.
Consequently, consumers, in certain cases, can spend thousands more on luxury goods in London than in Paris or Barcelona.
The Treasury argues that bringing back VAT-free shopping would cost around $2.46 billion annually, while the Centre for Economics and Business Research claims that removing tax-free shopping results in approximately $13.16 billion in lost GDP.
The NWEC reported an increasing disparity between visitor numbers and expenditures in London, encompassing tourists from both the US and Gulf countries, including Saudi Arabia.