Business leaders in the West End on Friday hailed the return of VAT-free shopping for overseas visitors as “a big win” for London.
Kwasi Kwarteng told MPs he would reverse the abolition of the benefit which had made shopping in the capital 20 per cent cheaper for foreign tourists.
It was scrapped by ex-Chancellor Rishi Sunak early last year, partly because the Treasury claimed it was a tax giveaway that only benefited London.
But critics said it would drive tourists to rival centers such as Paris and Milan where they can still reclaim VAT.
But in his statement, Mr Kwarteng said: “Britain welcomes millions of tourists every year and I want our high streets and airports, ports and shopping centers to feel the economic benefit. So we have decided to introduce VAT-free shopping for foreign visitors.
“We want to replace the old paper-based system with a modern, digital one. And this will be in place as soon as possible. This is a priority for our major UK retailers – so it is our priority too.”
The move, which combined with the fall in the value of the pound will make London a far cheaper shopping destination, was met with enthusiasm.
Dee Corsi, interim chief executive of business group New West End Company, said: “Today’s decision to reintroduce duty-free shopping for overseas visitors is a major win for London’s international centres.
“Now the West End can compete on equal terms with Paris, Milan and Madrid as one of the world’s best shopping and leisure destinations.
“In 2019, international visitors contributed over £28 billion to the UK economy. The Government’s announcement is great news and – with new exciting new brands expected across the West End following today’s announcement that newly opened businesses will not be subject to business rates – we are confident that we can surpass this figure in the years to come.”
Linda Ellett, head of consumer markets, retail and leisure at consultants KPMG in the UK, said: “The return of VAT-free shopping for tourists increases London’s competitiveness in attracting the purchasing power of international visitors.
“This is all the more important as we look for ways to generate economic growth, return international tourism to pre-pandemic volumes and resist rising high street inflation.”
Thierry Andretta, chief executive of luxury brand Mulberry, said: “This decision will restore London and the other major UK cities to their rightful place among the top luxury shopping destinations in the world, as well as providing invaluable support to the UK’s hospitality sector.”
Paul Barnes, chief executive of the Association of International Retail, said: “The reintroduction of duty-free shopping will give retailers across the country a much-needed boost to trade as international shoppers return to the UK. It will allow us to compete on equal footing with our European neighbors to attract high-spending international visitors back to our stores, hotels and restaurants.
“Today’s news brings with it a huge new tourist market of over 440 million people from the EU – now that the UK is the only country in Europe where EU visitors can shop duty free – which will be a significant boost to our retail, hospitality and tourism sectors across throughout the country, with regional airports benefiting from an increase in their visitor economies.
“This is a very good move by the Government and is set to deliver quick results as international visitors return in force across the country.”