British spending in the EU has risen more than fivefold in four years as shoppers increasingly shun UK stores in favour of VAT-free purchases on the Continent.
Data from the Association of International Retail (AIR) shows that Britons spent £742 million on VAT-free shopping in the EU last year, up from £527 million in 2022 and just £147 million in 2021. The trend is continuing in 2025, the industry researcher found, with spending in the first 22 weeks up 16 per cent compared with the same period in 2024.
The surge follows the UK government’s decision to scrap tax-free shopping for international visitors in early 2021, just as EU countries began offering VAT refunds to British travellers for the first time.
AIR argues that British consumers have become increasingly savvy, taking advantage of tax-free incentives abroad and travelling overseas to make significant purchases, rather than buying at home.
The findings are likely to intensify pressure on ministers to reintroduce tax-free shopping for all overseas visitors, including those from the EU, to restore Britain’s competitive position.
More than 500 business leaders, including the bosses of Burberry, Primark and other big retailers, have joined a campaign calling on Rachel Reeves to reverse the previous government’s policy.
According to AIR, reinstating tax-free shopping could deliver a major boost to the UK economy, creating 73,000 jobs, generating an additional £3.65 billion a year in GDP, delivering £1.8 billion in regional growth and raising more than £500 million a year in extra VAT revenue for the Treasury.
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Derrick Hardman, chairman of AIR, said: “The disproportionate increase in British visitor numbers to the EU shows that a new market in shopping-led tourism has emerged. It’s sad to see British shoppers taking their business elsewhere, but they’ve worked out that the tax rebates on the Continent more than outweigh the cost of hopping on the Eurostar or a cheap short-haul flight.”
He added: “It makes no sense for the UK to remain the only destination in Europe not offering tax-free shopping.
“Thanks to our position outside the EU, we now have a unique chance to reverse the policy of the last government and become the world’s shopping capital — offering tax rebates for both EU and non-EU shoppers. All the evidence shows that reintroducing a tax-free scheme would more than pay for itself, thanks to spending not just in retail but across hotels, restaurants, transport and entertainment. This government has promised to pull every lever available to promote growth — here is an obvious one.”
France has become the most popular EU destination for British VAT-free shoppers, accounting for 35 per cent of spending, with Paris representing three quarters of that.
Shoppers queue outside the Louis Vuitton store on the Champs-Elysées in Paris
ALAMY
The group argues that VAT-free shopping has created a new market in tourism, with British travellers spending not just on tax-free goods, but across hotels, restaurants and other experiences.
The impact of the UK’s policy has already been felt by British retailers. In 2023, Mulberry blamed the loss of VAT-free shopping for the closure of its flagship Bond Street store.
Helen Brocklebank, the chief executive of Walpole, the trade body for British luxury, said:
“Every pound spent by British and international tourists in Europe instead of the UK threatens growth, denies the Exchequer revenue and undermines the competitiveness of our retailers, manufacturers, hospitality businesses and iconic brands.”
A Treasury spokesman said: “The UK is one of the most visited countries in the world with international tourism driving billions into our economy. We are supporting the continued growth of this industry and will be launching a national visitor economy strategy this autumn to help meet our ambition to welcome 50 million international visitors a year to the UK by 2030.
“Visitors can still claim VAT relief where the items purchased are shipped directly to their home country as exports.”