Ditching tax-free shopping for tourists is costing the UK £11.1bn and deterring around 2m foreign visitors per year, the Centre for Economics and Business Research (CEBR) revealed.

The number of tourists visiting the UK is still roughly 1m fewer than pre-Covid levels, while spending in real terms has also not fully recovered.

The CEBR and business leaders highlighted that Rishi Sunak’s decision to charge tourists VAT on shopping in 2021, going back on a tax rebate implemented for decades, as a reason behind the UK’s slow recovery in tourism.

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The economic consultancy found visitor numbers would have soared 589,000 higher during the third quarter last year had a rebate scheme been in place, while there would have been roughly £1.3bn higher spending.

Visitor numbers could have also been boosted by 2m over the year with a £4bn rise in spending, resulting in a £11.1bn GDP increase and £2.5bn net fiscal gain.

The news comes as over 420 business leaders have called on the Prime Minister to reinstate tax-free shopping for tourists.

In a letter, the signatories highlighted research from Global Blue that revealed post-Covid recovery in consumer spending across Italy, Spain and France had overtaken that of the UK.

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