Heart of London-commissioned research projects up to 2.35 million extra visitors, £4.1 billion in additional spending and 152,900 supported jobs, but the estimates are scenario-based and the Treasury has previously challenged the fiscal case.
Cebr's upper-bound modelling estimates that restoring VAT-free shopping could attract 2.35 million additional visitors, add £4.1 billion in tourism spending and support 152,900 jobs. — Credit: Heart of London Business Alliance / Cebr
- Cebr's upper-bound scenario estimates that restoring VAT-free shopping could generate £4.1 billion in additional tourism spending and £11.5 billion in wider economic output.
- The model projects up to 2.35 million additional visitors and 152,900 supported jobs, but assumes full take-up of eligible VAT refunds in its top-end case.
- The report finds 2024 visitor numbers were close to 2019 levels while real inbound spending remained 8.7% lower and real spending per visit fell from £848 to £786.
- Cebr estimates a £2.6 billion net fiscal gain, contrasting with the Treasury's previous position that reintroducing the scheme would likely cost the Exchequer.
(NEWS) LONDON, United Kingdom, 2026-Sep-13 — /Travel PR News/ — Reintroducing VAT-free shopping for international visitors could generate as much as £11.5 billion in additional UK economic output and support about 153,000 jobs under an upper-bound scenario modelled by the Centre for Economics and Business Research (Cebr).
The September 2026 study of tourists’ economic behaviour in the UK, commissioned by the Heart of London Business Alliance, argues that the country’s inbound tourism recovery has been much stronger in visitor numbers than in the real value of spending. Cebr estimates that a fully utilised tax-free shopping scheme in 2025 could have attracted up to 2.35 million additional visitors, generated £4.1 billion in extra tourism expenditure and produced a £2.6 billion net fiscal gain after VAT refunds.
The figures are not a forecast of guaranteed gains. They represent Cebr’s top-end modelling case, including an assumption that eligible VAT refunds are claimed on all qualifying purchases. The report also makes clear that its employment estimate includes both additional jobs and existing jobs supported by higher activity, rather than 152,900 entirely new positions.
Visitor numbers have recovered faster than spending
The report’s starting point is a widening gap between inbound visitor volumes and visitor value. Using VisitBritain-adjusted data to improve comparability with the pre-pandemic period, Cebr estimates that overseas visits in 2024 remained only 1.3% below 2019 levels, while real visitor expenditure was still 8.7% lower.
Real spending per visit fell from £848 in 2019 to £786 in 2024, a decline of 7.4%. Cebr says average trip duration changed little over that period, suggesting the reduction reflects lower real expenditure rather than materially shorter stays.
The gap is particularly important because higher-spending long-haul markets have recovered more slowly. In 2024, non-EU visitors spent an average £1,210 per trip, more than twice the £510 average for EU visitors. Yet real spending by non-EU travellers had recovered to only 88.6% of its 2019 level, compared with 96.0% for EU visitors.
Cebr cautions that inflation, exchange rates and differing economic conditions in source markets also influence tourism demand. It does not claim that the abolition of the VAT Retail Export Scheme in 2021 can be isolated as the sole cause of weaker spending. Instead, the report argues that the pattern is consistent with a loss of price competitiveness because the policy change disproportionately affected non-EU visitors who had previously been eligible for VAT refunds.
London carries the biggest exposure to high-spending visitors
The policy debate is especially significant for London. The capital accounted for 48.0% of UK overseas visits and 54.7% of inbound visitor spending in 2024, according to the report. Non-EU travellers generated 64.4% of London’s inbound tourism expenditure.
Real visitor spending in London reached £16.9 billion in 2024, still below the £19.1 billion recorded in 2019 in constant-price terms. Cebr’s modelling suggests that, in its upper-bound reintroduction scenario, London could have attracted about 1.13 million additional visitors in 2025, adding £2.26 billion in visitor expenditure, £6.26 billion in gross value added and supporting around 65,500 jobs.
Ros Morgan, Chief Executive of Heart of London Business Alliance, frames the issue as one of international competitiveness rather than retail alone, arguing that visitor spending also flows into hotels, restaurants, cultural attractions, transport and other parts of the wider visitor economy.
The model puts the UK-wide spending gain at £4.1 billion
Cebr starts its national scenario with £33.2 billion of 2025 visitor spending in the parts of the UK directly affected by a potential policy change. It assumes 25% of tourist expenditure relates to shopping, using a VisitBritain estimate, and calculates that the average visitor would have paid about £32 in VAT on eligible shopping purchases.
Under the report’s full-refund scenario, that represents an effective saving equal to 4.2% of total trip spending. Cebr applies a tourism price elasticity of -1.3, meaning a 4.2% reduction in the effective cost of visiting the UK is modelled to increase visitor numbers by about 5.4%.
That produces an estimated 2.35 million additional visitors and around £1.8 billion of spending from those extra trips. The model then adds a separate 6.7% increase in consumption among visitors, worth about £2.3 billion. Together, the two effects produce the £4.1 billion headline increase in tourism spending.
To estimate the wider economic effect, Cebr applies a tourism spending multiplier of 2.8, taking the modelled gain to £11.48 billion in gross value added. Using region-specific output-to-employment ratios, the report estimates that 152,900 jobs would be supported by the additional activity.
Cebr says the Exchequer could still gain after refunds
The most contested part of the tax-free shopping debate is the fiscal impact. Cebr estimates that the extra activity in its upper-bound scenario could generate around £4.0 billion in tax receipts. It puts the cost of VAT refunds at about £1.4 billion, leaving a modelled net fiscal benefit of £2.6 billion.
The report says every £1 returned through VAT rebates could generate £1.54 in tax revenues elsewhere in the economy. It also tests a lower-take-up scenario and says the fiscal effect remains positive even if only 50% of eligible refunds are claimed.
That conclusion differs sharply from the UK Government’s most recently published parliamentary position located for this story. In a December 2025 Treasury answer, ministers said they had no plans to introduce a new tax-free shopping scheme in Great Britain and cited an Office for Budget Responsibility estimate that withdrawing the former scheme would save the Exchequer around £540 million a year by 2025-26. The Treasury said external analyses had not provided sufficient evidence that the benefits of a new scheme would outweigh the costs.
Cebr’s new study is therefore best read as a fresh challenge to that fiscal assessment rather than a settled estimate accepted across government and industry.
Regional gains would extend beyond London
Although London dominates the modelled benefits, Cebr estimates sizeable effects elsewhere. Scotland could receive about 220,000 additional visitors, £485 million more spending and £1.35 billion in extra GVA while supporting 21,900 jobs. The South East is estimated at 240,000 additional visitors, £335 million more spending and £928 million in GVA, with 13,700 jobs supported.
The North West is modelled to gain £808 million in GVA and support 13,800 jobs, while the South West, East of England and West Midlands each record hundreds of millions of pounds in potential output gains. Cebr says those regional effects would be reinforced by supply-chain spending beyond the places where tourists make their purchases.
Northern Ireland is treated differently in the modelling because its tax treatment already differs from Great Britain. Current UK Government guidance confirms that visitors to Northern Ireland who live outside Northern Ireland and the EU can still obtain VAT refunds from participating retailers on eligible goods, subject to the scheme’s conditions. In Great Britain, visitors can generally obtain tax-free treatment only where goods are delivered directly to an address outside the UK.
The report notes that non-EU spending recovered relatively strongly in Northern Ireland, which it says is consistent with the proposition that VAT refunds can support visitor demand. It also cautions that Northern Ireland is a comparatively small tourism market and that participation in its retail export scheme is voluntary.
A policy argument built on price competitiveness
Cebr’s wider case rests on the idea that tourism demand responds to relative prices. Its own regression work for EU visitors over 2002-2019 estimates that a 1% appreciation in the real value of sterling against the euro is associated with a 0.7% reduction in real visitor spending and a 0.9% reduction in visitor numbers.
The report also points to outbound behaviour by British travellers, who have been able to access tax-free shopping across much of the EU since Brexit. Proprietary Global Blue data cited by Cebr show the gross value of British tax-free retail sales in France rising from €159 million in 2021 to €947 million in 2025.
For Heart of London Business Alliance, the report strengthens the case for reviewing the policy as part of the UK’s broader tourism and growth strategy. For policymakers, the central question is whether the behavioural assumptions, multipliers and fiscal effects in Cebr’s scenario are sufficiently robust to overturn the Treasury’s existing assessment.
What the study does establish more clearly is the scale of the tourism spending gap it is trying to address: the UK has largely recovered its international visitor volumes, but the real value generated per trip remains below 2019 levels. The debate over VAT-free shopping now turns on whether changing the tax treatment of visitor purchases would materially close that gap, and at what net cost or benefit to the public finances.
