Loss of VAT refunds for tourists damaging to regional economy

Retail, leisure and tourism leaders from across Greater Manchester have expressed concern following the surprise decision from the Treasury to remove the option for international visitors to reclaim VAT on their spending.

The decision means the UK will now be the only country in Europe not to offer tax-free shopping to international visitors, which would put at risk £60m of tax-free sales to Greater Manchester’s visitor economy, according to tax free shopping specialists, Global Blue and Planet.

As the third most visited destination in the UK, Greater Manchester attracted 1.89 million international visitors in 2019, who contributed around £850m to the local economy.

Shopping is a key motivation for international visitors, who spend around £60m in tax-free shopping alone, attracting visitors from China, India and the Middle East, who are now likely to travel to other European destinations.

This will also have a significant negative effect on the economic impact of hotel and restaurant bookings, and visitor numbers at cultural attractions.

With the start of the Brexit transition period on December 31, 2020, tax-free shopping will come to an end, damaging retailers across the region, who have, for many years, offered in-store tax-free shopping and have reaped the financial benefits from an increased footfall of international visitors.

Marketing Manchester, alongside CityCo and Manchester BID, are calling on the Government to reverse the decision to cancel the VAT Retail Export Scheme for EU and non-EU visitors – giving a much-needed boost to tourism, hospitality and leisure.

Sheona Southern, managing director of Marketing Manchester, the region’s official tourism body, said: “This decision is concerning for Greater Manchester.

“The visitor economy in our region is already expected to lose £5.5bn of the expected annual value of £9bn from the impact of COVID-19 and is in desperate need of a boost.

“The loss of £60m to tax-free shopping as well as the knock-on effect of lower visitor numbers who will visit other EU destinations instead will hit the economy hard.

“Removing duty-free shopping without consultation with the industry will have significant wider financial impact on the visitor economy and is an unwelcome message to overseas visitors at a time when a warm welcome to the world is needed more than ever.”

She added: “This was a surprise announcement. We were expecting the current tax-free arrangements to be extended to include EU residents which would have helped to drive more short haul visitors to the region.”

Jane Sharrocks, chair of Manchester Business Improvement District, said: “The decision to withdraw tax free shopping entirely, rather than extending it to the EU, will have untold impact on the local economy in Manchester and the UK economy as a whole.

“International visitors and their tax-free spending are supported by a wider tourism ecosystem beyond just retail, including leisure, hospitality and travel.”

Adrian Ellis, chair of Manchester Hoteliers Association, said: “Hotels in Greater Manchester greatly benefit from the large number of international visitors who are attracted to the region for tax-free shopping.

“Removing this offer for visitors will have a huge impact on the number of visitors to the region, which would be highly damaging for accommodation providers with an effect on bookings.

“It is vital that the UK retains the tax-free shopping incentive to ensure regions like Greater Manchester can remain competitive against other international destinations.”