Non-refundable VAT hitting UK visitation by Chinese shoppers hard

New research by Oxford Economics and the Association of International Retail (AIR) finds that the UK is losing 750M GBP ($921M) annually because tourists from China are spending less money on shopping in the country.

Independent research by the Centre for Economics and Business Research finds that non-refundable VAT is discouraging 2M tourists per year from coming to the UK.

Prior to Brexit, visitors to EU countries (including the UK) from outside the EU could get refunds of VAT paid on purchases of merchandise done in the EU. But in 2021, following Brexit, then-Chancellor Rishi Sunak ended tax-free shopping for foreign visitors by no longer refunding the 20% VAT paid at time of purchase.

Also since Brexit, the exchange rate of renminbi vs. sterling has been less favorable for the Chinese than that of renminbi vs. euro.

The end result is that it is now merchandise bought in the UK by Chinese visitors is10-12% more expensive (after currency exchange and payment processing fees) than purchases made in the EU.

Accordingly, in summer 2023, Chinese visitors to Europe did most of their shopping in Italy, France, Spain and Ireland, and significantly less in the UK.

In 2019, pre-COVID, the UK received 880,000 visitors from China who stayed at average of 16.33 nights and spent 1937 GBP ($2379) per person, making China the country's #2 most valuable source market in terms of spend.