Cost-of-living crisis: How tourists are being priced out of Britain

Foreign tourists could swerve visiting Britain because it’s becoming too expensive, it was claimed today amid growing calls to bring back tax-free shopping for them.

Analysis by MailOnline has found tourists pay far more for hotels, alcohol and shopping in London compared with other popular cities in Europe and beyond.

And holidaymakers in popular shopping areas such as Oxford Street in London and Bicester Village in Oxfordshire said they were unimpressed by the tourist tax, adding: ‘If we have to pay the same price as a local resident, that’s a big turn off.’

Some of the UK’s biggest names in retail, hospitality and tourism have urged the Chancellor to scrap the tourist tax amid fears that it is holding back the economy.

They are concerned that the removal of VAT-free shopping for international visitors is driving tourists away from UK cities to the likes of Paris, Madrid and Milan. 

MailOnline can reveal today that some West End hotels have even learned of tourists staying in London before catching the Eurostar to Paris to do their shopping.

Shopping has traditionally been one of the most popular reasons for visiting the UK, but it is feared Britain is now missing out after the VAT refund scheme was abolished.

This week the Daily Mail launched a ‘Scrap The Tourist Tax’ campaign in support of the firms urging the Government to think again.

Business group New West End Company said research had shown 71 per cent of all tourists claim they would buy more on visits to the UK if the VAT-free scheme was still in place, which rises to 93 per cent amongst the highest spenders.

Dee Corsi, its chief executive, told MailOnline: ‘The harmful impact of this tourist tax is being amplified as international visitors return to London in greater numbers.’

She added: ‘Anecdotally, we have also heard from West End hotels that some tourists stay in London before catching the Eurostar to Paris to do their shopping.

‘As well as attracting more visitors from key destinations such as the US, China and Gulf states, the Chancellor could create a Brexit bonus by removing the tourist tax to encourage more of the EU’s 450million citizens to visit London and shop tax free.

‘This would put our capital in prime position to lead the global luxury shopping market.’ 

Paul Charles, chef executive of travel consultancy The PC Agency, said many visitors to Britain are currently taking advantage of excellent exchange rates.

The expert said that for many, especially American visitors, the UK is effectively 25 per cent cheaper than it was before the pandemic due to the weakness of the pound, meaning they are spending more than ever on experiences once they’ve arrived at their destination.

But he cautioned: ‘The Government knows that tourist spend is higher despite the tourist tax being in place. 

‘However, the exchange rate won’t be so good forever and ministers need to use every lever they have at their disposal to encourage higher spend for the long term. That includes removing VAT on tourist spend as soon as possible.’

Research carried out by MailOnline today has looked at the relative costs of trips to London for tourists – specifically those coming from America, China, Italy and the United Arab Emirates. 

The cheapest five-star hotel in London’s West End is £197 a night – far more than in the city centres of Madrid (£150), Milan (£158), Paris (£141), Dubai (£91) and Rockley beach in Barbados (£178), although much lower than Rome (£267), according to data from Expedia.

Luxury shopping is also far pricier in London compared to other cities, with a pair of high-end jeans coming in at £75, compared to £48 in Madrid, £68 in Rome, £54 in Barbados and £46 in Dubai. Milan and Paris are more expensive at £78 and £89 respectively, according to data from Numbeo, the global crowdsourced cost of living database.

The average pint of beer is £6 in London, above the £5.31 in Milan, £4.43 in Rome, £2.64 in Madrid and £2 in Barbados. Paris is slightly pricier at £6.20 but then Dubai is substantially more expensive at £10.04, again based on figures from Numbeo.

However, when comparing the average price of menus at three Michelin star restaurants in a city, London is actually cheaper than most rivals at £195 per person. This is compared to £353 in Paris, £323 in Madrid, £309 in Milan and £282 in Rome. Dubai has no three-star restaurants, but does have two two-star outlets which have an average menu price of £213.

For an American tourist travelling from New York, the cheapest possible return flights in June are priced for London at £562 each, according to Skyscanner. 

This is below the £645 for Madrid, £725 for Milan and £753 for Rome; but pricier than the £507 for Paris and £490 for Barbados.

Those visiting from Dubai will find return flights for London for £529 per person, below the £747 for Madrid and £828 for Rome, but above the £504 for Paris and £444 for Milan. Barbados is £1,413.

Italian visitors coming from Rome can get a return to London for £50 – cheaper than to Madrid (£51), Paris (£57) and even Milan (£67). Rome is £743 and Barbados is £760 with one stop each way.

And Chinese tourists coming from Beijing can get London return flights for £728 – below the £867 for Paris, £1,062 for Milan, £1,100 for Rome, £1,478 for Madrid and £1,932 for Barbados, with one stop. But it is above the £628 for Dubai.

Meanwhile tourists spoken to by MailOnline in Bicester Village this week have said they are now looking at going to locations such as the Middle East and US instead of Britain.

Anupam Varma, 38, who is from Mumbai in India but now lives in Bahrain, said: ‘I have been to Bicester Village five or six times. This change in tax has 100 per cent affected me. As tourists, if we have to pay the same price as a local resident, that’s a big turn off.

‘If they (brought back) this scheme, where tourists get this privledege of not having to pay that tax, I’m sure as tourists we would be shopping a lot more and spending a lot more here.

‘All in all I’d say the UK economy would benefit from this. Our expenditure has gone down per visit to the UK (since the tax was introduced) by half, 50 per cent. We are spending less because it is costing us a lot more money.

‘I would say we are looking to go to more Middle Eastern countries now, Dubai for example has become more of a shopping centre for us.

‘At the moment we would go to America (over the UK) – America is a lot cheaper in every sense, even though it’s further away for us than other countries, it’s a lot cheaper.’

Mr Varma’s wife Urmila Varma, 38, added: ‘I would spend a lot more definitely. I come at least once a year now but I would come a lot more definitely. We would be more incentivised to come here more often.’

Danah Ateeq, 21, from Saudi Arabia, who has visited the UK four times, said: ‘They should bring it back (to the way it was) for sure. Shopping is not our main purpose for coming here, and we came here (to Bicester Village) before and wanted to come back.

‘But after it happened, the UK is not our main destination for shopping now. Since it happened, I think we should just shop in our own country. We used to travel here because it is cheaper but I think now it has similar prices to our country. It’s not a big difference.’

Phasin Opasphilai, 26, from Bangkok in Thailand, added: ‘So my mum has just seen a bag she really likes, but we are going elsewhere in Europe in a few months so we are going to buy it somewhere else, maybe Croatia.

‘We will still come back to the UK but we will shop less because 20 per cent is a lot of money. I think they (the Government) should get rid of it.’ 

Phasin’s mother Jong Dee Opasphilai, 59, added: ‘We will go elsewhere for shopping for sure. I feel like other countries, for example France, are cheaper in price than the UK.’

Abdullih Alazmi, 55, from Kuwait, also shopping in Bicester Village, said: ‘It’s affected me in a way that I will not buy as many items – it’s restricted me a little bit. Before I used to spend every last pound because I knew I would receive some money back at the airport.

‘People would get rewarded so would spend more (while at the airport). Now I will just sit in my hotel until I take my things and leave to go to the airport.’

James Lambert, deputy chairman of Value Retail, owner and operator of Bicester Village and its sister villages globally, told MailOnline: ‘From our direct experience working around the world, there is no question that the abolition of the VAT Refund Scheme continues to have a negative effect on the UK economy.’ 

Hayley Beer-Gamage, chief executive of tourism group Experience Oxfordshire, told MailOnline that she was ‘disappointed with the Government’s decision to abolish tax-free shopping for international visitors to the UK’.

She added: ‘We know that prior to the pandemic, the retail industry played a major role in attracting over thirty million visitors a year to Oxfordshire contributing £2.5billion to the local economy, with retail accounting for 23 per cent of visitor spend across the county.

‘The reintroduction of a tax-free shopping scheme, creating a recognised incentive to travel, would provide a welcome injection into our sector’s post-pandemic recovery and growth of our overall visitor economy.’

In Oxford city centre, visitor Heidi Geertsen, 53, from Antwerp in the Netherlands, told MailOnline: ‘We don’t buy a lot of things in shops – we just wander around using the cafes and restaurants, but not really the shopping centres.

‘It is more expensive than usual though. Paris is also expensive, Scandinavia is expensive, in Europe it’s all so expensive.

‘A lot of people who are coming here are rich enough (for it not to affect them) but maybe for those who are poorer it is a reason for them not to come.’

Anna Marques, 31, who lives in Oxford but was shopping in the Westgate mall with her in-laws who are from Portugal, where Ms Marques is originally from, said: ‘If people are coming here to do shopping, they will do it anyway.’

But she added that the Government should still scrap the tourist tax, saying: ‘They should bring it back because it’s always a good thing. Some tourists will avoid buying more things for sure.

‘We just went to one shop where the mug was £20 – we didn’t buy that obviously – but if there was the 20 per cent off, we might be in mind to buy more expensive things because we would have the cash back.

‘If they brought it back, they could bring more tourists back and that would be great for the UK because bringing people in for tourism would obviously increase the income, which will be good for the country’s economy.’

Ryan Tinetti, 40, and Anne Tinetti, 41, both from the US, were also in Oxford city centre. Mr Tinetti said: ‘If you are already coming all that way, it’s such a big expense that something like that is just a drop in the bucket.’

Mrs Tinetti added: ‘It might change how much I spent when I was here, but it wouldn’t change whether or not I would come.’

And Tonia Buttes, 53, from North Carolina in the US, said: ‘I came to the UK for a different reason, to visit my daughter, but of course anyone would prefer there not to be a tax.

‘It very well may (put people off coming to the UK), anybody looking to travel is going to include shopping. I think there will be more incentive to visit a place that doesn’t have that.’

In London, shoppers along Oxford Street and Carnaby Street have been affected by the change and are considering other options for their next holiday.

Mariam Ibrahim has travelled to London from her home in Riyadh, Saudi Arabia, and only found out that she could not claim money back when she arrived in the country.

Now, she has been left frustrated that she won’t be able to claim the tax she has paid on her shopping at the airport.

The 30-year-old housewife said: ‘We didn’t know we couldn’t claim back the tax until we got here so now it is so much more expensive. We used to save a lot as we would get a lot back but now it makes things more expensive.

‘It would stop me coming here again I think, and maybe other countries would be better, it could be cheaper.’

Another shopper was also unaware of the change before she arrived.

Maria, who would not give her surname, travelled to London from Arizona in the US, specifically to shop along London’s iconic high streets.

Now knowing she cannot claim back the taxes, the 47-year-old product owner is regretting the decision to come to the capital.

She said: ‘I came here for shopping so that is not good to hear. If that is the case I would just have shopped back home in the US. It’s a big chunk to not get back. So that is a shame.’

Maria added: ‘I probably wouldn’t go somewhere else as I don’t go across the world always to shop. I would probably just stick with shopping at home.’

Tina Gayle used to live in the UK and on her return she was shocked to see the rise in prices.

The office manager travelled from Switzerland to see family in the UK, but wouldn’t recommend people coming if they didn’t have a specific reason to do so.

The 46-year-old said: ‘It is very, very expensive. I used to live here and I have noticed it is very different now. With Brexit it is just awful and not getting tax back will affect us – it makes it more expensive to come here.

‘We are here visiting family but I wouldn’t recommend people to come here now for a holiday as it is too, too expensive. It’s not worth it.’

Another shopper, Sven, who also wouldn’t give his surname, had travelled from his home in Belgium and was outraged by the amount of tax tourists are being forced to pay.

He said: ‘It is absolutely ridiculous. I don’t go to the US anymore because of all the tax we have to pay and if the tax goes up here it definitely could put me off coming back.

‘It is very expensive here compared to Belgium so I am less likely to shop here. I will only buy something if I can’t get it anywhere else but no I wouldn’t want to shop here really. It’s too much.’

Sven also has been left rattled with the service charge in the UK.

He said: ‘Last night we went for dinner, the food was average and the service was s*** and still we have to pay almost £60 for service. It is ridiculous.

‘I pay service charge when I want to, not when I haven’t had good service.’

One anonymous shopper has his sights now on other cities to get his luxury goods.

He said: ‘I would rather go shopping in Milan or other places now. It is quite a good amount we used to get back so without that option it seems like a waste of money buying here when we can get the option somewhere else. Why shop here when it’s cheaper elsewhere?’

However, not everyone is bothered by the change. For Reem Almajaim, even without the ability to claim back tax, shopping in London is cheaper than in her home in Kuwait.

The 23-year-old is studying engineering and is on a shopping holiday. She said: ‘It’s great shopping in London. I have been shopping in Milan and Paris before this but I prefer it here in the UK.

‘I don’t mind not getting the tax back. It’s still cheaper here than back home so no I don’t mind it.’

Walking down West London’s iconic Portobello Road in Notting Hill, a number of tourists told MailOnline that they were not concerned by the issue.

But Andre Amaral, who had travelled to the UK from Portugal, said he would avoid shopping in London and had noticed a rise in prices since his last visit.

The 25-year-old business analyst said: ‘Everything is more expensive I think. The prices from the airport and accommodation are more expensive.

‘It is much more expensive to shop here than Portugal so I would not shop here. I can wait until I’m home. Maybe if we could claim back it would be different but now I just don’t need to.’

It comes as industry leaders said the decision to scrap VAT-free shopping for foreign visitors in 2021 means London is now losing out on the post-Covid recovery in high-end retail and tourism being enjoyed by Paris and Milan. 

The focus of the luxury industry has shifted back to China in recent months after Beijing finally relaxed Covid-19 curbs after three years.

Luxury spending by Chinese nationals dipped from 33 per cent of the global personal luxury goods market in 2019 to as little as 17 per cent last year, according to estimates from consultancy Bain.

In the UK, so far 125 of the biggest names in retail, hospitality and tourism have joined the Mail’s campaign to bring back tax-free shopping for overseas tourists.

Another ten companies yesterday added their signatures to a letter to Chancellor Jeremy Hunt, including the head of property of the historic Burlington Arcade off Piccadilly, and the chief executive of Edinburgh-based jewellers Hamilton & Inches.

Research suggests that bringing back tax-free shopping would result in a much-needed £4.1billion boost to the UK’s GDP and support 78,000 jobs.

And, despite the Treasury claiming it would cost it £2billion in lost taxes, experts estimate there would in fact be a net gain to the Exchequer of at least £350million a year.

Former prime minister Liz Truss, London Mayor Sadiq Khan and Liberal Democrat leader Sir Ed Davey have already added their voices to the clamour, although the Labour Party refused to do so.

Burberry chairman Gerry Murphy said yesterday that the ‘perverse decision’ to scrap tax-free shopping in 2021 was diverting business from the UK to Europe.

The letter to the Chancellor, organised by hotelier Sir Rocco Forte, states: ‘Every country remaining in the EU now offers tax-free shopping, while we don’t. 

‘Effectively, we have suddenly started charging 20 per cent more than other countries for the same goods. The Treasury claims this is saving the taxpayer £2billion a year, but this is misleading.

‘The visitors who have traditionally come from the US, Middle East, China and elsewhere to shop inject large sums into the broader economy, on top of what they spend on retail purchases.’

Adam Hug, the Labour leader of Westminster City Council, said Miss Truss’s attempt to bring back tax-free shopping during her brief tenure in No10 was the ‘one shard of light’ in the mini-Budget, but that it ‘got snuffed out pretty quickly by Jeremy Hunt’.

He said yesterday that, while pushing to bring-back tax-free shopping was not ‘immediately intuitive’, the ripple-effect benefits were clear.

‘Westminster is home to two major international retail centres – both in the West End and Knightsbridge,’ he added.

‘The shopping that takes place in those centres has a massive ripple-effect through our local economy, in terms of people coming to shop, they stay to have dinner, they go and see a show.

‘It creates a virtuous circle for the local economy which ultimately helps to drive economic growth, helps local employment… and it helps keep Westminster and London going.

‘We’ve been struggling with the lack of tax-free shopping when compared to many other international centres.’

He warned: ‘It’s making a real difference to the economic vibrancy of London and ultimately I think it’s important that we think strategically about what we can do to change it.

‘This is one measure that would bring far more economic growth in the long run, and ultimately more revenue for the Exchequer through different routes.’

The TaxPayers’ Alliance also backed the campaign, saying the ‘tourist tax’ is a ‘punitive charge’ that is nowhere else in the EU.

The lobby group’s chief executive John O’Connell said: ‘In typical Treasury thinking, this levy looks good on the balance sheet, but hits the real economy hard by encouraging tourists and their wallets to go elsewhere.

‘The Government should give our economy a shot in the arm by reinstating the retail export scheme.’

Mr Hunt has previously said it would be too ‘expensive’ to change the policy.