The Conservatives have announced plans for VAT-free shopping restoration for overseas visitors, arguing the policy could attract more than two million additional tourists and inject billions into the UK economy. The pledge comes as evidence mounts that scrapping the scheme four years ago has cost British retailers and the wider economy far more than was acknowledged at the time.
Andrew Griffith MP, the Conservative Shadow Chancellor, set out the proposal, committing a future Conservative government to reinstating VAT refunds for eligible overseas visitors. The party says it will begin by reviving the previous scheme, which covered visitors from outside the EU, before considering an extension once Treasury evaluations have measured the net economic benefit.
The cost of axing VAT-free shopping
The original scheme was withdrawn by HMRC from Great Britain on 1 January 2021, when airside tax-free shopping was also ended, according to Business Matters Magazine. The move was presented at the time as a post-Brexit simplification, but its effects on inbound tourism spending have proved hard to ignore.
Visitor numbers have since recovered to near pre-pandemic levels, yet real-terms spending remains 8 per cent below where it was before Covid, according to VisitBritain. Griffith argues the abolition of the scheme is directly linked to that gap, with high-spending tourists increasingly bypassing the UK in favour of Paris or Milan, where VAT refunds remain available.
The figures from Business Matters Magazine are stark. London’s West End alone is estimated to have lost £310 million in the first half of 2025 as a direct consequence of the scheme being axed. Separately, had the tax-free shopping facility been in place last year, research cited by Business Matters Magazine shows it would have boosted GDP by £11.5 billion.
Independent research conducted by Cebr, commissioned to assess the policy, found that fully restoring tax-free shopping could attract up to 2.35 million additional visitors and generate £4.1 billion in extra spending. For every £1 of VAT refunded to tourists, Cebr estimates an additional £1.56 could be generated in other taxes, meaning the fiscal cost of the refunds would be more than offset by broader economic activity.
The Centre for Economics and Business Research also tracked the scale of eligible tourist spending over recent years, estimating it stood at £6.6 billion in 2022 and rose to an estimated £7.7 billion in 2023. That trajectory suggests demand for the scheme from visiting shoppers has been growing even in its absence, pointing to a pool of activity that retailers are currently unable to capture.
Industry backing for VAT-free shopping restoration
The announcement has drawn support from a range of business figures. Hotel entrepreneur Sir Rocco Forte, Fortnum & Mason’s Tom Athron, and top chef Angela Hartnett OBE are among those backing the proposal, according to Griffith. Their involvement spans hospitality and retail, the two sectors that would benefit most directly from a surge in tourist spending on British high streets.
Griffith framed the policy within a broader package of supply-side measures the Conservatives say they would pursue in government. The party has also announced plans to scrap stamp duty on primary home purchases and to relieve high street shops of business rates, with the Shadow Chancellor arguing that cutting taxes and reducing regulatory burdens are the conditions under which firms can compete and grow.
The political contrast Griffith draws is with the current Labour government’s record on retail and hospitality. He points to rises in employer National Insurance contributions, higher business rates, and what he describes as plans to tax tourism, as evidence that the two parties take opposite approaches to the sectors that drive footfall on British high streets.
For the UK’s most recognised shopping destinations, from Bond Street in London to Princes Street in Edinburgh, the VAT-free shopping restoration proposal represents a direct attempt to win back the high-spending overseas visitors who currently treat the country as a transit point rather than a destination in its own right. Whether a future government acts on it, the economic case for doing so has been building steadily in the data since 2021.
