British consumers are increasingly flocking to Europe to take advantage of VAT-free shopping incentives, with new data showing a fivefold rise in spending since the UK government scrapped tax-free shopping for international visitors in 2021.
Figures released by the Association of International Retail (AIR) reveal that British shoppers spent £742 million on VAT-free goods in the European Union in 2024, up from £527 million the previous year and just £147 million in 2021. The trend has continued into 2025, with spending during the first 22 weeks of the year 16 per cent higher than the same period in 2024.
The sharp increase in overseas spending follows the UK’s decision to abolish VAT-free shopping for foreign visitors in the wake of Brexit. At the same time, EU member states began offering tax rebates to British tourists for the first time, creating a clear disparity that has shifted high-end retail spending across the Channel.
Retailers and industry groups warn that the decision is damaging the UK’s competitiveness as a shopping destination. Business leaders are now intensifying calls for Chancellor Rachel Reeves to reverse the policy, amid fears that British retail and tourism are losing out to European rivals.
More than 500 senior figures from across the retail and hospitality sectors, including the bosses of Burberry and Primark, have backed the campaign to reinstate VAT-free shopping. The Association of International Retail argues that bringing the scheme back would boost the UK economy, create tens of thousands of jobs and generate significant additional tax revenue.
AIR estimates that reintroducing tax-free shopping would deliver an annual £3.65 billion boost to GDP, create 73,000 jobs, generate £1.8 billion in regional growth, and return over £500 million in additional VAT revenue to the Treasury. The group claims that British travellers have become increasingly savvy, realising that the VAT refunds available in countries such as France, Spain and Italy more than offset the cost of travelling abroad for luxury and high-value purchases.
France has become the most popular EU destination for British VAT-free shoppers, accounting for 35 per cent of all such spending, with Paris alone responsible for nearly three-quarters of that figure. AIR says this shopping-led tourism trend is now supporting hotels, restaurants, transport providers and other industries in Europe, while UK high streets continue to suffer.
In 2023, British luxury brand Mulberry blamed the loss of VAT-free shopping for the closure of its flagship store on London’s Bond Street, citing reduced demand from international shoppers. Other businesses have echoed these concerns, warning that the UK is now the only country in Europe without a tax-free shopping offer for overseas visitors.
Helen Brocklebank, chief executive of Walpole, the trade body for British luxury brands, said the loss of VAT-free shopping was undermining growth and damaging the wider economy.
“Every pound spent by British and international tourists in Europe instead of the UK threatens growth, denies the Exchequer revenue and undermines the competitiveness of our retailers, manufacturers, hospitality businesses and iconic brands,” she said.
Despite mounting pressure from business leaders, the Treasury has so far defended the decision to scrap the scheme. A government spokesperson said the UK remains one of the most visited countries in the world and pointed to plans for a new national visitor economy strategy, due to be unveiled this autumn.
“The UK is one of the most visited countries in the world with international tourism driving billions into our economy,” the spokesperson said. “We are supporting the continued growth of this industry and will be launching a national visitor economy strategy this autumn to help meet our ambition to welcome 50 million international visitors a year by 2030. Visitors can still claim VAT relief where the items purchased are shipped directly to their home country as exports.”
However, industry leaders argue this alternative is too restrictive compared to the seamless in-store refund systems offered by EU retailers, and that the UK risks falling further behind unless the tax-free scheme is reinstated. With autumn’s Budget approaching, pressure is mounting on ministers to reconsider the policy and help restore Britain’s appeal as a destination for high-spending tourists.