Brands warn UK must restore VAT-free shopping to attract US tourists amid tariff fears
Two of Britain’s oldest luxury brands have reignited calls for the return of VAT-free shopping for international tourists, warning that President Trump’s sweeping new tariffs could divert American shoppers away from the UK to continental Europe.
William Church, joint managing director of Northampton-based luxury shoemaker Joseph Cheaney & Sons, said Britain now “stands at a self-imposed competitive disadvantage to our European counterparts” following the abolition of the VAT refund scheme in 2021. He urged the government to “reinstate [the scheme] immediately to significantly stimulate badly needed economic growth”.
“The benefits would be strongly felt in the wider economy by making the UK a more economically attractive place to visit,” Church said.
Ian Maclean, executive chairman of John Smedley, Britain’s oldest knitwear manufacturer, echoed the call, stressing that the scheme supported businesses and supply chains across the UK, including in regions beyond London and the South East.
The VAT refund scheme, which allowed non-EU visitors to reclaim the 20 per cent sales tax on purchases, was scrapped post-Brexit—a move that has been roundly criticised across the retail and hospitality sectors. Industry leaders have described its removal as a “crazy, wrong-headed decision” that has damaged Britain’s appeal as a shopping destination.
The issue has gained new urgency after the Trump administration introduced fresh tariffs that could raise prices on US-bound goods. Many fear that American tourists, now facing higher prices at home, may choose to shop in EU countries where VAT-free incentives still exist—bypassing the UK altogether.
Walpole, the industry group representing British luxury brands such as Alexander McQueen, Burberry and Harrods, said reinstating VAT-free shopping would send a strong signal that the UK is “open for business” and serious about competing on the global stage.
Under the previous government, then-Chancellor Jeremy Hunt ordered a review of the VAT-free shopping scheme by the Office for Budget Responsibility after sustained pressure from business leaders. However, Hunt ultimately opted not to reverse the policy after the OBR estimated that restoring the scheme would cost the Treasury £2 billion a year by 2025-26, compared to savings of £540 million from its withdrawal.
Despite these fiscal concerns, luxury brands and retail businesses argue that the wider economic benefits of reinstating VAT-free shopping—including increased visitor numbers, higher overall spending and support for British supply chains—far outweigh the projected costs.
As competition for high-spending tourists intensifies, industry leaders warn that the UK risks losing out to European rivals unless urgent action is taken to level the playing field.
Read more:
Brands warn UK must restore VAT-free shopping to attract US tourists amid tariff fears