Thought of the Week

No respite for retail in the Spring Budget

March 7, 2024 3 Minute Read

By Jen Siebrits


In what has been a ‘will they, won’t they’ moment in recent budget announcements, it was confirmed yesterday that VAT-free shopping remains off the card for international visitors.

It has been four years since the 2020 decision to abolish tax-free shopping for tourists, and it has been challenging for the UK to present a compelling retail offering when there is little to no incentive for overseas shoppers to purchase goods here.

For retailers looking to get a foothold in the European market, the UK will be considered as the first landing point more often than not. But we only need to look to leisure businesses and retailers in operation to see how this is impacting the sector.

Many household names have publicly come forward to express the knock-on effect the decision has since had on footfall figures and sales volumes. This is particularly true for those operating at the luxury end of the market, whereby the 20% reimbursement is of significant value and in turn, has caused some brands to rethink their in-store product offering across the UK, notably in airport outlets.

It’s a decision that hasn’t gone unnoticed by consumers, either. A recent survey commissioned by the Association of International Retail found that 63% of 8,000 respondents would be more likely to make big purchases in Britain if VAT-free shopping was reinstated. With a respondent pool across the United States, China, South Korea and across the Middle East, it certainly feels like a unified view that VAT-free shopping is an attractive perk.

And with bricks-and-mortar stores the beneficiary of a resurgence in in-store shopping, what better time to incentivise international visitors? Oxford Street, one of the most widely recognised shopping destinations globally, typifies the long-term vote of confidence in the sector.

Demonstrated by a buoyant 2023 for leasing activity, CBRE data shows that last year, 27 lettings completed on Oxford Street, totalling circa 200,000 sq ft. Of these deals, 19 were new entrants to the street and four new brands to the UK market altogether, evidencing the appeal of London’s retail market.

At a time of renewed optimism for the sector, the absence of a reversal to tax-free shopping in the Spring Budget announcement feels like a fundamental miss. Despite some new-found complexities around the incentive since Brexit (notably to ensure EU visitors would be eligible), reinstating the 20% relief could have been a relatively simple but effective step in encouraging higher volumes of overseas footfall, with positive and tangible knock-on effects for the wider economy.


Thought of the Week

Navigate the ever-changing real estate landscape with CBRE's Thought of the Week. The series features our experts’ views, offering insightful perspectives into the latest market trends in the UK that are shaping the industry.


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