Importance of international retail
As Britain moves into a new era outside the European Union, this vital sector of the retail industry has a key role to play in the UK’s future economic success.
AIR recognises it is essential that Government and business work together to create the best possible environment for the growth of this big export sector.
Shopping is one of the UK’s main attractions for international visitors, boosting the wider tourism industry across the whole country.
Luxury goods shopping brings high spending visitors from China, the Middle East and the United States.
In London, shopping accounts for over 46% of all tourist spending, more than accommodation (30%) and everything else (24% on travel, eating, culture and entertainment cost).
- Generates £6 billion annual sales throughout the UK
- Employs 120,000 people directly
- UK’s 12th largest export sector
International visitor spending in London
(Date source: VisitBritain)
Top international retail centres
Much of the UK benefits directly from shopping by international shoppers.
The UK’s top international centres are:
- London, specifically the West End and Knightsbridge International Centres
- Bicester Village
Britain's international visitors
During 2018 there were 37.9 million visitors to the UK, spending a total of £23 billion.
Top Regions (2018)
Top three countries (2018)
Lothian (Edinburgh) :6%
Greater Manchester :4%
Top three areas visited (2018)
(Date sources: VisitBritain and Global Blue)
International retail growth potential
Rising prosperity and falling travel costs have led to strong growth in international tourism since the 1980s.
Between 1980 and 2018 the number of international visitors to the UK grew by 205%.
Recent growth has been from countries where shopping is a major activity, such as China and other parts of the Far East. The biggest potential for future growth comes from these shopping focussed nations.
Chinese people are already the world’s biggest tourist spenders and in the UK they are the biggest shoppers, accounting for over 25% of all tax free shopping. But only 9% of Chinese people have a passport compared with over 70% of Britons. Worldwide Chinese tourist numbers have grown from 10.5 million in 2000 to 149.7 million in 2008 and are forecast to grow to 400 million by 2030.
Britain has seen Chinese visitor numbers grow from 210,00 in 2008 to over 580,000 in 2018 (based on the number of visitor visas issued), a growth of nearly 180%.
Chinese visitors 2000
The VAT Retail Export Scheme, abolished by the Government on December 31st 2020, allowed international visitors from outside the EU to claim back the VAT paid on certain goods brought from certain shops when they take those goods out of the UK.
With shopping being a key attraction for international tourists, this scheme encouraged more tourism and more shopping in the UK.
The amount of tax reclaimed shows the value of tax free sales. HMRC calculates that tax free sales amount to £3 billion in 2019. The true figure, based on retail sales data, is around £3.5 billion. The difference is accounted for by tax free sales where the reclaim has not been made.
Research by Global Blue shows that for every £1 repaid, HM Treasury gained £1.90 in tax, mainly generated by increased tourist spending on other (taxed) items and additional tax paid by companies and employees.
Visitor numbers and retail spending in the UK
From EU member states (not eligible for tax free shopping) : 71% of visitors and 42% of retail spending.
From the rest of the world : 29% of visitors and 58% of retail spending.
Impact of ending tax-free shopping
AIR estimates that the direct impact of ending the VAT RES will be a direct loss of £1.5 billion in direct sales. This will be matched by losses of associated sales in retail, hospitality and cultural sectors as many high spending visitors choose to visit and spend in other European countries.
AIR predicts a significant net loss of VAT to the government together with over 40,000 redundancies throughout the UK as a direct result of the Chancellor’s decision.
Top 5 tax-free shopping visitors in the UK
1. China (25%)
2. Kuwait (7%)
3. Qatar (7%)
4. Saudi Arabia (7%)
5. USA (6%)
There are six times more visitors to the UK from the USA than from China but the Chinese spend four times more on shopping.
Top 5 goods categories
1. Fashion and clothing
2. Watches and Jewellery
3. Consumer electrics and household appliances
4. Sports equipment and clothing
5. Perfume and cosmetics
Top 5 counties for tax-free sales
(Date source: Global Blue)
"Shopping is one of the most popular activities for overseas visitors to Britain, with around 70% of all leisure visits involving shopping."