Roddy Smith: End of tax-free shopping a spectacular own goal for UK
Roddy Smith discusses the negative impact of the UK government’s decision to end tax-free shopping on the tourism industry, particularly in Edinburgh, and the ongoing efforts to reverse this decision in order to boost the economy and attract more visitors.
The decision of the Westminster government to end tax-free shopping is turning into a spectacular own goal for UK plc. As we continue our recovery post pandemic and visitors return to Edinburgh in increasing numbers, we should be promoting our city and encouraging more tourism, not putting barriers in visitor’s way. We should be creating a more dynamic economy attractive to foreign visitors and investors and instead the Treasury has decided to scrap tax-free shopping for international tourists.
Edinburgh’s economy, and certainly that of our city centre, is heavily dependent on our successful tourism industry. We have superb hotels opened in recent years, new hotels under construction and in the pipeline, we have huge investments in world class properties such as the St James Quarter and Johnnie Walker Princes Street. These are all geared to our successful tourism sector which as we know supports huge numbers of jobs in the city directly and through the supply chain.
The timing of the decision could not have been worse, after the pandemic caused so many devastating issues for the retail and hospitality sectors. This, of course, is not just affecting luxury businesses but the entire economy, as tourists who traditionally come here to shop would spend in restaurants, cafes, theatres, hotels, public transport and so on.
Westminster claims this change saves the government £2 billion a year. This is short-sighted, since the foreign visitors who come from the US, Middle East, China and elsewhere to shop for the best of British inject huge sums into the broader economy, on top of what they spend on retail purchases. Figures from Visit Britain show that shopping has traditionally been one of the most popular reasons cited for visiting the UK. Indeed, British business made £3.5bn in tax-free sales to tourists every year. The scheme benefited tourist hotspots like London, Manchester and here in Edinburgh, as well as out of town shopping villages which attract visitors seeking bargains. With Edinburgh being the gateway to tourism in Scotland, the more tourists we can attract will benefit the economy throughout the country as tourist disperse to other parts of Scotland after/before their visit to Edinburgh.
But now we have suddenly started charging 20% more than other countries do for the same goods, international visitors who we should be doing everything we can to encourage to come here won’t hesitate to go elsewhere and we are starting to see the effect in Edinburgh.
Every country remaining in the EU now offers tax-free shopping, while the UK do not, putting our economy at a significant disadvantage. Even British shoppers visiting EU countries can shop tax free! Competitor cities such as Paris, Rome and Berlin can’t believe their luck. How depressing to learn that a great British brand like Mulberry has just closed the doors of one of its flagship stores in Bond Street as a direct result. It was no coincidence that the Burberry Chairman Gerry Murphy, used a recent business summit to confront the Prime Minister about the major impact and damage his government’s decision has done. If his promise to have businesses back is true, then reversing this decision would be a good start.
Working in partnership with the Association of International Retail and many top end brands, our concerted campaign to reverse the government’s decision is ongoing and we hope the continuing dialogue with the Treasury and senior politicians will see a change in direction. According to Oxford Economics, the reintroduction of tax-free shopping would attract more than 1.6 million extra visitors a year to the UK by 2025. Here in Edinburgh, we need to work with the supportive Scottish Government to lobby for change.
We can’t afford to turn tourists away. The Chancellor must think again.
Roddy Smith is chief executive of Essential Edinburgh