We are now just months away from the five-year anniversary of the UK’s VAT retail export scheme having come to an end in January 2021. However, one thing that hasn’t greatly changed over the years, is the steady stream of requests to bring back such tax-free shopping for the benefit of international visitors to the UK. 

In the latest instance of this phenomenon, the Association of International Retail (AIR) has said recent data shows the UK’s domestic shoppers are “deserting” British shores in favour of the tax-free shopping experiences member states of the European Union (EU) can offer. 

Indeed, according to AIR, such spending is not only climbing with each passing year, but has gone up more than fivefold since 2021. This paints a rather inauspicious picture for the UK, of spending by rest-of-the-world customers having been suppressed in the country, and the UK’s own shoppers having decided to flock across the Channel. 

What do the numbers say about how much Britons have been spending in Europe? 

Data from AIR shows that over the course of 2024, Britons spent £742 million on VAT-free shopping in the EU. This was a marked jump from the £646 million recorded for 2023, which in turn, was significantly north of the £527 million expenditure seen in 2022. The equivalent figure for 2021 was “just” £147 million. 

What’s more, it seems this pattern of rapid growth has continued in 2025, with spending during the first 22 weeks of the year some 16% higher than in the corresponding period of 2024. 

As for exactly where in the EU these British retail enthusiasts have been heading in order to take advantage of VAT-free shopping, AIR found that France had become the most popular destination. In fact, the country attracted 35% of all spending, while Paris made up 75% of this. 

Pressure on the Government to “put British businesses back on a level playing field” 

As the Fashion Network website noted in its report of AIR’s discoveries, although the UK Government ended tax-free shopping for visitors to the UK at the start of 2021, EU countries extended this perk to British shoppers for the first time. 

The result of this mismatched situation, AIR observed, was that UK nationals were “increasingly shunning homegrown stores and travelling abroad to make significant purchases where they can reclaim sales tax.” 

The national sector support body said the findings would “increase pressure on ministers to reintroduce tax rebates for all international visitors – both EU and non-EU – to put British businesses back on a level playing field.” 

Could a return for VAT-free shopping have the hoped-for transformative effect? 

AIR’s analysis found that if the UK Government did take the step of reversing its policy on tax-free shopping on its own shores, the new market for EU shoppers alone would bolster the UK economy by more than £3.65 billion a year. 

Moreover, the association has claimed that a comeback for VAT-free shopping in the UK would create 73,000 jobs up and down the country, give regions of the UK a £1.8 billion annual boost, and generate over £500 million in additional VAT alone for the Treasury. 

These figures are markedly different from those produced by the Office for Budget Responsibility (OBR)’s economic impact assessment some years ago. Back then, the OBR suggested that abolishing the VAT retail export scheme could bring the Treasury a saving of £1.8 billion by the 2025/26 fiscal year. 

Nonetheless, AIR is convinced of the merits of bringing VAT-free shopping back to the UK. The body has insisted “all the evidence shows that reintroducing a tax-free shopping scheme would more than pay for itself thanks to all the spending stimulated not just in retailers but on hotels, restaurants, transport, tourist attractions and entertainment.” 

Whatever happens with the UK retail scene, we can help your high-end brand navigate it 

As a luxury digital agency in the UK capital, Skywire London will continue to keep a close eye on the various calls for VAT-free shopping to return to the UK. However, we will not wait with particularly bated breath for ministers to change their own stance on this issue anytime soon. 

Nonetheless, if you would appreciate having an in-depth conversation with our creative, strategic, and digital experts as you look to plot sustained growth for your luxury, lifestyle, or fashion brand through the coming years, please don’t hesitate to contact us.

Photo by Alessandra Sio on Unsplash