Reinstating tax-free shopping for tourists would boost UK GDP by £11.5bn, figures show - as Sadiq Khan throws weight behind policy

See more This is Money on Google - save us as a Preferred Source Updated: 17:00 EDT, 1 September 2026 Scrapping the hated tourist tax would boost economic growth by £11.5bn and sustain 153,000 jobs, according to new analysis - as Sadiq Khan reiterated his support for a reversal of the policy.Before the VAT-free shopping initiative was axed in 2021, tourists from outside the EU could receive a tax refund on purchases made in the UK, essentially making items 20 per cent cheaper.Bringing the scheme back would generate billions in extra economic output and deliver a £2.6billion net gain to the Treasury's coffers, according to a new report by the Centre for Economics and Business Research (Cebr), commissioned by Heart of London Business Alliance (Holba).The latest report says that up to 2.35million additional international tourists would come to the UK each year if the scheme was restored.Instead of spending money in Britain, tourists are currently flocking to Paris, Milan and Berlin, leaving these economies to reap the rewards at the UK's expense. Slump: Big cities, including London, have been impacted by a downturn in tourist spendingAlthough international visitor numbers have nearly recovered to pre-Covid levels, spending levels are vastly lagging behind. Overseas visits in 2024 were 1.3 per cent below 2019 but spending was 8.7 per cent lower, with the average expenditure per visit dropping from £848 to £786.The Mail has been campaigning for the Government to 'Scrap the Tourist Tax' to help boost all avenues of the visitor economy - from factories producing luxury goods to tearooms in countryside tourist hotspots.More than 500 firms have backed the campaign.Big names, including Giorgio Armani, Pernod Ricard and the owner of the Westfield shopping centres all argue that the cost of such refunds is outweighed by the enormous benefits of encouraging more visitors to Britain.It would also be a chance for the country to cash in on a new market created by Brexit. If restored, the scheme would be extended to EU visitors as well as those from outside the EU. This would make Britain the only big European destination to offer VAT-free shopping to both markets.Now, the Mayor of London Sadiq Khan is among those calling for new Chancellor John Healey to announce a review in the Budget on 28 October.Khan called on ministers to reinstate tax-free shopping to 'make it clear to the world that London and the UK is open for business.'He said: 'London is a globally renowned tourist destination, but the decision to remove tax-free shopping by the previous Government was a huge mistake which has led to us trailing behind other European cities on visitor spending for too long.'This report highlights how reintroducing tax-free shopping would entice millions more additional international visitors to the UK each year, providing a multi-billion boost to the economy, supporting thousands of jobs and generating more money for the public purse.'Ros Morgan, chief executive of the Heart of London Business Alliance, which commissioned the research, said the latest report provided 'the most compelling evidence yet' to axe the hated tax.She added: 'The UK's tourism sector remains one of our greatest economic assets, yet we have made ourselves less competitive than every major European rival.''At a time when economic growth is rightly the Government's top priority, restoring tax-free shopping is one of the clearest pro-growth measures available.'DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you