The removal of tax‑free shopping is holding back Manchester’s economy, with new estimates placing the cost in the hundreds of millions a year in lost retail spend, erosion of jobs, and fewer benefits to the hospitality and culture sectors.
Business and political leaders gathering today in the city for a high‑level roundtable will discuss new figures from the Association of International Retail (AIR) showing that restoring traditional VAT rebates for international visitors would generate an additional £228 million a year in spending in Manchester.
The boost would affect not only retailers, but would benefit the entire tourist economy, including hotels, restaurants, tourist attractions, museums and galleries, taxis and transport. This would create 4,500 new jobs in the city.
The conclusions will add to pressure on Chancellor Rachel Reeves to concede a full-scale review of the last UK government’s decision to scrap tax-free shopping, available for decades, in 2021. The move has left the UK as the only economy in Europe no longer offering VAT rebates to international visitors, putting businesses at a significant disadvantage.
Before Brexit, VAT rebates were available to visitors from outside the EU for decades and were seen as a major driver of tourism. The decision to axe them proved highly controversial and was branded a ‘tourist tax’ by critics.
Over 500 business leaders, including those representing Manchester Airport Group, The Edwardian Manchester hotel, Selfridges, Avanti West Coast, the Trafford Centre and Marketing Manchester are now calling for a rethink on the policy, arguing that as well as retailers the entire tourist economy has been affected.
The UK is increasingly losing ground to France, Italy and Spain when it comes to visitor spending as a result, according to new data.
Figures from tax free shopping specialist Global Blue and major retailers show that spending by non-EU visitors has stagnated at just 75 per cent of pre-Covid levels in the UK, while soaring to 166 per cent of 2019 levels in Spain, 159 per cent in France and 137 per cent in Italy.
Tourism contributes around £9 billion annually to Greater Manchester’s economy, supporting over 100,000 jobs across hospitality, retail, transport and cultural sectors.
Around 1.4 million international visits are made each year to Manchester, making it the most visited UK city after London and Edinburgh. Overseas visitors to the city spend an average of £259 a day.
However, the AIR figures published today show that if Manchester had kept pace with the rest of the EU, there would have been an additional £180 million spent by EU visitors and £48 million by non-EU visitors.
Derrick Hardman, chair of the Association of International Retail, said: ‘Manchester is unfairly being held back by the Government’s policy on tax-free shopping.
‘With Britain no longer in the EU, we have the opportunity to become the best place in the world for retail.
‘Reinstating tax‑free shopping would give the UK a unique competitive advantage: the ability to attract not only non‑EU tourists, but also tap into a new market of 450 million EU consumers.
‘It is time for the UK Government to work with industry to look again at the impact of tax‑free shopping on the economy and the Exchequer, and to design a modern, digital, fiscally positive scheme that supports jobs, investment, high streets and the visitor economy in Manchester and all across the UK.”
Jane Sharrocks, chair of Manchester City Centre Business Improvement District (BID), said:
“Manchester is a leading international visitor destination with multiple attractions, including world-class sport and leisure, a stellar music scene and a proud heritage. Manchester is also the principal gateway for visitors to the north of England; however, the city-region competes in a global marketplace, and the continued policy to withdraw tax-free shopping has an adverse impact on both the regional and UK economies.
“Since the removal of tax-free shopping, the UK has been comparatively less attractive to high spending tourists than other European cities. International visitors and their potential tax-free spending are supported by a wider tourism ecosystem beyond just retail, including leisure, hospitality, and travel. Therefore, businesses across the region would welcome an urgent review of the full potential of a modernised tax-free shopping scheme, with its relaunch ultimately helping deliver growth across the UK.”
