Reeves under pressure to reinstate VAT-free shopping as US tariffs bite
Retailers and luxury brands are urging Labour’s Rachel Reeves to reinstate tax-free shopping for tourists as escalating trade tensions with the US put pressure on British exports and consumer demand.
Retailers and luxury brands are urging Labour’s Rachel Reeves to reinstate tax-free shopping for tourists as escalating trade tensions with the US put pressure on British exports and consumer demand.
Four major trade groups — the British Retail Consortium, British Beauty Council, British Fashion Council and Walpole — have written a joint letter to the shadow chancellor warning that President Trump’s tariffs are already beginning to harm UK businesses and risk long-term damage to the country’s global competitiveness.
“US tariffs will negatively impact our businesses’ profitability,” the groups said in the letter, seen by The Times. “We are considering how we, as associations, and the UK government could best support businesses at this time.”
Retailers and brands say that with American consumer confidence weakening, many high-end shoppers are now travelling abroad to avoid higher domestic prices.
However, because the UK scrapped its VAT-free shopping scheme for international visitors in 2021, many tourists are choosing to spend in Paris or Milan instead, where tax rebates remain available.
The trade bodies argue that restoring the VAT exemption — which allowed tourists to reclaim 20% VAT on UK purchases — could help soften the blow from falling US sales and boost Britain’s attractiveness as a global shopping destination.
“Introducing this policy is not a luxury,” the letter stated. “It is a proven growth strategy.”
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The call to act comes as a number of UK businesses scale back their presence in the US or cancel orders due to trade concerns. Others are facing demands from US buyers to cut wholesale prices.
According to Bain & Company, every £1 spent by high-value international visitors contributes £8 to the wider UK economy, with wealthy tourists spending up to 14 times more than the average visitor — most of it on shopping, culture and entertainment.
Visit Britain has forecast that overseas tourist spending will remain nearly 10% below pre-pandemic levels in 2024. The trade associations said that the absence of tax-free shopping has made this worse, contributing to lost revenues, business downsizing and weakened UK supply chains.
A Treasury spokesperson said: “We have no plans to introduce a new tax-free shopping scheme in Great Britain. Visitors can continue to claim VAT relief where the items purchased are shipped directly to their home country as exports.”
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