Two of Britain’s oldest luxury brands have renewed calls for the reinstatement of VAT-free shopping for international tourists, citing concerns that President Trump’s new tariffs could drive American shoppers away from the UK. The brands argue that the move would help the UK regain its competitiveness in the global retail market, particularly against European rivals who still offer VAT-free shopping incentives.
William Church, joint managing director of Northampton-based luxury shoemaker Joseph Cheaney & Sons, warned that the UK now faces a “self-imposed competitive disadvantage” due to the abolition of the VAT refund scheme in 2021. He called on the government to “reinstate [the scheme] immediately” to stimulate much-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 added.
Ian Maclean, executive chairman of John Smedley, a long-established British knitwear manufacturer, echoed Church’s sentiment. He stressed that the VAT refund scheme had supported businesses and supply chains across the UK, including those in regions outside London and the South East.
The VAT refund scheme, which allowed non-EU visitors to reclaim the 20% sales tax on purchases, was scrapped following Brexit. The decision has faced widespread criticism from the retail and hospitality sectors, with many industry leaders calling it a “crazy, wrong-headed decision” that has harmed Britain’s appeal as a shopping destination.
The issue has taken on new urgency after the Trump administration introduced fresh tariffs that could increase prices on US-bound goods. With American tourists now facing higher prices at home, there are growing concerns that they may opt to shop in EU countries, where VAT-free shopping is still available, bypassing the UK altogether.
Walpole, an industry group representing British luxury brands such as Alexander McQueen, Burberry, and Harrods, has also called for the reinstatement of VAT-free shopping. The group believes that doing so would send a strong signal that the UK is “open for business” and committed to competing globally.
Although former Chancellor Jeremy Hunt had ordered a review of the VAT-free shopping scheme, he ultimately decided not to reverse the policy. The Office for Budget Responsibility estimated that reinstating the scheme would cost the Treasury £2 billion annually by 2025-26, compared to the £540 million saved by scrapping it.
Despite these fiscal concerns, luxury brands and retail businesses argue that the wider economic benefits, including increased visitor numbers, higher spending, and support for British supply chains, would far outweigh the projected costs. As competition for high-spending tourists intensifies, industry leaders warn that the UK risks losing out to European competitors unless action is taken to level the playing field.
