Milan is one of the favorite shopping destinations for wealthy tourists Photo: Stefano Politi Markovina/Alamy Stock Photo
American shoppers avoid London in benefiting European cities such as Paris, Milan and Madrid after Rishi Sunak's controversial tourist tax, new figures show.
Luxury boutiques and retail stores in London's West End, which have long attracted the attention of wealthy tourists, are seeing a decline in spending by visitors from the US, despite an increase in traffic.
Data from the New West End Company (NWEC), which represents businesses in central London, showed that bookings for flights to London from the US grew by 17% in the three months to June 2023 compared to the same period 2019.
However, the amount of cash spent by American tourists in the West End during this period fell by 1%.
On the contrary, the amount American shoppers spend in France is up 183% compared to 2019 and 174% in Spain, according to NWEC, citing duty-free trading company Global Blue.
Di Corsi , chief executive of the NWEC, said: «When visitors from as far afield as the US come to the UK, they often make a multi-stop trip that spans all of continental Europe.»
«Because shopping is a key priority for long-distance travelers, we know they are proactively exploring where their dollar can go the furthest, and for now, it's not in London.»
Wealthy Gulf tourists, such as Saudi Arabia and the UAE also cut spending in London, according to data that showed visits from Gulf Cooperation Council (GCC) countries rose 7% in the three months to June, but spending fell 17%.
Has the UK tourism tax saved you from spending on luxury goods?
At the same time, according to the NWEC, Gulf tourist spending in France and Italy rose by 118% and 112%, respectively.
The government has faced repeated warnings from luxury industry bosses that that the decision to waive VAT in 2021 has hurt the capital and made it less competitive compared to destinations in continental Europe.
When Mulberry, the luxury handbag retailer, closed its longtime New Bond Street store in February, chief executive Thierry Andretta said the combination of falling trade from foreign visitors and soaring prices made it unviable.
About 50% of the store's sales come from foreign tourists. before the abolition of duty-free shopping compared to about 5% after.
Harrods managing director Michael Ward said earlier this month that the company was forced to replace luxury bags with cheaper goods at its airport stores due to a tourist tax.
Mr Ward said: «We used to be able to sell a bag for £1,000 or £1,500 and people would save up and say «I'll take this bag and buy it at the airport because I can get £200 or £300 tax back.» .”
Shoppers line up in front of a Gucci luxury boutique in Paris. Credit: Benjamin Girette/Bloomberg
The rebate — which previously allowed tourists to claim refunds of VAT paid on certain purchases, such as luxury clothing, was abolished in 2021 after Brexit.
At the time, ministers argued that it was not a significant enough tourist attraction to benefit the whole of the UK outside of central London.
Lise Truss planned to restore tax-free shopping when she was Prime Minister, but this was quickly canceled when Jeremy Hunt took over as Chancellor after a mini-budget in September.
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