UK URGED TO WOO GULF SPENDERS BY RESTORING TAX-FREE SHOPPING

▶ Retailers and MPs call for pre-election budget to restore tax break scrapped after Brexit

Britain is being urged to lure back big spenders to its luxury shopping sector by reinstating a tax break for tourists.

The National has been told that visitors from the Gulf are among those to have been “deterred” since a tax-free scheme was dropped in 2021.

Retailers are campaigning for Chancellor of the Exchequer Jeremy Hunt to restore the measure in a pre-election budget next month.

A group of Conservative MPs have also gone public to warn that the so-called tourist tax has had “significant repercussions” on tourism.

Under the old rules, non-EU visitors could claim back tax on goods they took home with them from Britain.

It was scrapped after Brexit, with ministers calling it a costly £2.5 billion ($3.16 billion) a year relief that only benefitted certain areas such as London.

Mr Hunt kept the door open to an about-turn in his autumn statement, telling MPs that officials were “looking again at the numbers” and studying how rival luxury markets in Paris and Milan have fared.

However, he warned this week that there may be limited scope for tax cuts in the March budget, as he came under pressure from the Conservative benches to offer a pre-election giveaway to voters.

Bringing back VAT-free shopping was part of the tax-cutting plans of Liz Truss’s government in 2022, but the package was a political flop and was shelved as her reign imploded.

In a submission to Mr Hunt, the Association of International Retail said he should revisit those plans in the budget to stem a “growing diversion of spending by non-EU visitors away from Britain to continental Europe”.

The group has handed figures to the Treasury showing that spending by non-EU tourists had risen above pre-coronavirus levels in mainland Europe but fallen in the UK. It warned this trend could “continue to get worse in 2024”.

Sam Miley, an economist at the Centre for Economics and Business Research, told The National that tourists from the Gulf and East Asia were the main markets that appeared to have stayed away since the tax rules changed.

Figures from various retail sources, such as providers of high-end goods, suggest “high-spending individuals are being deterred from visiting the UK”, Mr Miley said.

Gulf visitors will benefit from UK visa rules that came into force on Thursday, meaning they can make unlimited visits to Britain for two years with an Electronic Travel Authorisation.

The visa programme is open to citizens from the UAE, Qatar, Bahrain, Oman, Kuwait, Saudi Arabia and Jordan, with Gulf travellers expressing hope of a surge in arrivals and investment.

However, a letter signed by 38 Conservative MPs warns tourism and associated sectors such as leisure, retail and hospitality in the UK are being held back by the shopping tax.

High-end fashion houses Mulberry and Burberry are among those that have blamed the tax change for a hit to their earnings.

Chancellor Jeremy Hunt is under pressure from the Conservative benches to offer a pre-election giveaway to voters