The return of tax-free shopping would boost the economy and lead to 73,000 new jobs in the UK, according to an Association of International Retail (AIR) report.

A submission to ministers from AIR today (22 July) insisted that the reintroduction of VAT-free shopping would lead to the economy gaining nearly an additional £3.7bn “Brexit benefit” per year.

The report urged the government to overturn the Rishi Sunak’s government’s 2021 decision to abolish tax rebates for tourists.

In a submission to the Department for Culture, Media and Sport, the association claimed that Brexit had created the opportunity for the UK to offer VAT-free shopping to European and non-European tourists, comprising a potential 450m market of customers.

AIR noted that keeping the measure in place was harming the country’s post-Covid tourism recovery, highlighting that the UK’s visitor numbers recovered to 96% of their 2019 rate last year, compared to 100% in France and 101.9% in Spain.

In addition, UK tourist spending hit 92% of 2019 rates last year, compared to 110% in France and 106% in Spain.

The company reported that the economy would see an extra £3.65bn spend if tax-free shopping by new EU visitors was permitted at the same level as British VAT-free spending in the EU last year.

Likewise, AIR forecast that it would lead to an extra £1bn in annual spend by non-EU tourists diverted to Spain, France, Italy, and other VAT-free locations when the rebates were scrapped.

AIR chair Derrick Hardman said: “With Britain no longer in the EU, we have the opportunity to become the best place in the world for shopping. 

“While the 26 EU countries offer VAT-free shopping to non-EU visitors, including those from the UK, Britain is now in the unique position of being the only major European country where this attraction could also be offered to all 450m EU residents.”

He added: “This would give Britain an unchallengeable competitive advantage within Europe. 

“In addition to levelling the playing field with our EU competitor destinations who all offer VAT refunds to non-EU visitors, Britain would have the unique opportunity to create a whole new, shopping-led, EU tourism market.”

The news comes after Burberry boss Joshua Schulman called on the UK government to bring back VAT-free shopping for international visitors yesterday (21 July), insisting it could help Britain reclaim its status as Europe’s top shopping destination.

In February, it was also reported that The West End lost £640m last year due to the lack of tax-free shopping, rising from £400m in 2023.

Click here to sign up to Retail Gazette‘s free daily email newsletter