US shoppers abandon London for tax-free Paris and Milan
Dee Corsi, chief executive of NWEC, said: “When visitors from further afield, including those from the US, come to the UK, they are often on a multi-stop trip which takes them all around continental Europe.
“With shopping a key priority for long-haul travellers, we know that they research in advance where their dollar can go furthest – and at the moment, that’s not in London.”
Wealthy tourists from Gulf countries, such as Saudi Arabia and the UAE, have also cut spending in London, according to the data, which showed visits from Gulf Cooperation Council (GCC) countries rose 7pc in the three months to June but spending fell 17pc.
Meanwhile, GCC tourists’ spending in France and Italy rose by 118pc and 112pc respectively, according to NWEC.
The Government has faced repeated warnings from luxury industry bosses that the decision to axe VAT-free shopping in 2021 has harmed the capital and made it less competitive compared to continental European destinations.
When high-end handbag retailer Mulberry closed its longstanding New Bond Street store in February, the company’s chief executive Thierry Andretta said the combination of falling trade from overseas visitors and surging costs had made it unviable.
Around 50pc of the store’s sales came from overseas tourists before VAT-free shopping was scrapped, compared with about 5pc after.
The managing director of Harrods, Michael Ward, said earlier this month the company had been forced to replace luxury handbags with lower-priced goods in its airport shops due to the tourist tax.
Mr Ward said: “We used to be able to sell a £1,000, £1,500 handbag and people would save up and say ‘I’m going to have that bag and I’ll buy it at the airport because I can get £200 or £300 tax back’.”
The discount – which previously allowed tourists to claim back the VAT paid on certain purchases such as upmarket clothes – was scrapped in 2021 in the wake of Brexit.
Ministers argued at the time it was not a significant enough lure for tourists and did not benefit the wider UK outside Central London.
Liz Truss planned to reinstate VAT-free shopping when she was Prime Minister, but this was quickly reversed once Jeremy Hunt took over as Chancellor after the mini-budget in September.