The loss of tax-free shopping for tourists in the UK cost retailers in London’s West End £220m in unrealised sales in the first half of this year, new research has found.

Data from the New West End Company estimate that retailers in the area are on course to suffer a bigger financial hit this year than the £400m in unrealised sales last year, despite the rising number of international visitors.

The former government scrapped tax-free shopping for overseas visitors under chancellor Jeremy Hunt in 2021.

Since the introduction of the so-called tourist tax, the retail industry has long campaigned for the shopping incentive to be reinstated as international visitors head to mainland Europe to receive VAT refunds on their luxury purchases.

New West End Company chief executive Dee Corsi said the lack of tax-free shopping was having a “knock-on impact on our entire tourism ecosystem”.

“The loss of £400 million in unrealised sales last year in the West End alone is just a small part of this story.

“Fewer sales on the shop floor means fewer tourists in restaurants and hotels. If the government is serious about returning the country to growth, tax-free shopping presents a rare, golden opportunity to do so.”

The latest research come as chancellor Rachel Reeves is preparing her first budget for the end of next month.

Reeves has warned of “tough decisions” on tax rises and spending cuts necessary to repair the public finances, while Labour has said that it will not reinstate tax-free shopping as it tries to generate more income for the exchequer without raising income tax, VAT or national insurance.

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