The reintroduction of tax-free shopping for international visitors to the UK could provide a significant boost to the economy, according to a recent report by the Centre for Economics and Business Research (CEBR). The report estimates that restoring the VAT refund scheme, which was abolished in 2021, would generate an additional £11.5 billion in economic output, support more than 153,000 jobs nationwide, and deliver a net gain of £2.6 billion to the Treasury.

The CEBR analysis highlights that reviving the scheme could attract up to 2.35 million more tourists annually, resulting in approximately £4.1 billion in extra spending. Although international visitor numbers have mostly recovered since the Covid-19 pandemic, visitor expenditure has not returned to pre-pandemic levels. Overseas visits in 2024 were estimated to be just 1.3% below 2019 figures, but real spending per visit dropped by 8.7%, falling from £848 to £786.

The report underscores the impact of the tax-free shopping removal on key regions. London’s West End alone is estimated to have lost around £310 million during the first half of 2025 as a direct consequence of the policy change. Reinstating the scheme could add £6.3 billion in gross value added (GVA) for London annually, along with supporting 65,500 jobs and drawing an additional 1.13 million visitors. Other parts of the UK would also benefit substantially; for example, Scotland might see an extra £1.3 billion in GVA and nearly 22,000 new jobs, while Wales could gain £172 million and more than 3,000 jobs.

The UK currently stands out among major European countries for having discontinued tax-free shopping, a move that some analysts say has placed it at a competitive disadvantage compared to destinations like France and Italy, where non-EU tourism has rebounded more strongly.

London Mayor Sir Sadiq Khan criticized the previous government’s decision to scrap the scheme, describing it as “a huge mistake” and urging the current government to consider restoring tax-free shopping in the upcoming autumn budget.

In response, the Treasury declined to comment on the report’s findings or proposals, stating that decisions on fiscal matters will be announced at official events and that it does not engage in speculation or respond to rumours.

Overall, the report presents reinstating the VAT refund scheme as a potential lever for enhancing the UK’s appeal to international tourists, boosting economic growth and employment across multiple regions. However, government action remains pending as the autumn budget approaches.