Duty-free shopping ‘blunder’ will cost 160,000 jobs, industry group claims

‘The chancellor must reverse this ill-considered decision,’ said Tory MP Henry Smith

Duty free shopping is set to end in January (Getty Images)

Changes in the rules for duty-free shopping from 2021 will cost £8bn in lost tourism spending and trigger 160,000 job cuts, an industry group has warned.

The UK Travel Retail Forum (UKTRF), representing airports, ferry lines, retailers and supplies, says the damage will result from a decrease in sales when VAT is applied from the New Year. It called the move a “blunder”.

A raft of new rules will be implemented from 1 January 2021 as the Brexit transition period ends.

The group is seeking to overturn two changes. The first will end the opportunity from foreign visitors to reclaim VAT on purchases made in the UK when they leave the country. The second will lead to VAT being applied to all sales at “airside” shops. At present, the tax is removed for customers travelling to destinations outside the European Economic Area.

The chair of the UKTRF, Francois Bourienne, said: “It may well be the best gift the UK could have given the EU.

“This decision puts the UK out of step with travel retail systems around the world, completely disincentivises tourists to visit the UK and British passengers making purchases as they go on vacation abroad.

“It puts UK airports and travel retail at a substantial disadvantage against their European counterparts after Brexit. This will lead to significant additional job losses in the travel industry.”

Two prominent Conservative MPs have joined calls for a U-turn. Sir Roger Gale, president of the General Aviation All Party Parliamentary Group, said the changes “will damage aviation, ferries and tourism post-Brexit”.

Henry Smith, chair of the Future of Aviation Group, said: “The chancellor must reverse this ill-considered decision in order to support our beleaguered airports and to protect the jobs, businesses and communities that depend on a thriving aviation sector.”

At the time the measures were introduced, the Treasury said the airport VAT allowance was being removed because of “concerns that the tax-concession is not always passed on to consumers in the airport”.

It added: “In some instances these tax-free goods are brought back into the country by UK residents, putting high street retailers at a disadvantage.’’

On ending the VAT Retail Export Scheme, the government said: “Overseas visitors will still be able to buy items VAT-free in store and have them sent direct to their overseas addresses, while the costly system of claiming VAT refunds on items they take home in their luggage will be ended.”

When the chancellor announced the changes on 11 September, Joss Croft, chief executive of the industry body UKinbound, said: “The desperate needs of British inbound tourism businesses, who bring international visitors to the UK and support tens of thousands of viable jobs, have once again been overlooked.

“These businesses are sustainable and will be profitable again, once international tourists can return and are no longer impeded by measures such as quarantine.’