UK retail spend by tourists to remain subdued – report

We’ve heard a lot about how tourist spending remains subdued in the UK following the withdrawal of the VAT-free perk post-Brexit, but that muted spending isn’t about to change any time soon it seems.

A new study shows that inflation and the strong pound will also dampen down tourist spending growth in Britain up to 2030.

A study by the Centre for Economics and Business Research (CEBR), initially reported by The Times, showed that real spending per tourist will lag behind the overall expected growth rate of Britain’s economy over the next half-decade. It seems that while tourist numbers remain strong, the amount they’re spending isn’t that impressive.

The report said the weak growth will be just half of the growth in the wider economy.

It comes as the UK’s inflation continues to be higher than that of other major tourists destinations such as the EU, the US and China. Even as inflation drops from its highs of a few years ago, overall prices in the UK have risen by 26.6% in the past six years. That means prices of the products tourists might buy, as well as other spending areas such as accommodation, dining and travel are proportionately higher than in those other destinations. And that’s without taking the impact of the strong pound into account, which means tourists get fewer pounds for their dollars, euros, yen or renminbi.

But of course, the ending of the 20% VAT refund perk for tourists is the big factor deterring high-spending visitors. That perk stopped in January 2021 with numerous reports showing that London’s key shopping districts, in particular, have suffered as tourists have gone to other shopping cities such as Paris and Milan.

The CEBR also said new electronic travel authorisations (ETAs) for European visitors and the air passenger duty rise has added both cost and complexity to visiting the UK.

Based on figures from the Office for National Statistics (ONS) and tourism board VisitBritain, it added that “tourists are expected to spend less per visit in real terms in 2025 than in any other year over the past decade, with the exception of 2020”.

As for that projection that tourist spend will lag the growth of the UK’s economy, the report said VisitBritain believes there will be 43.4 million tourists visiting Britain this year. They’re expected to spend £33.7 billion in 2025.

By 2030, the government wants to increase international visitors to the UK to 50 million. But the CEBR said that “current spending patterns suggest that meeting this ambitious target would result in only a 6.5% increase in real-terms expenditure compared with pre-pandemic levels”. It added that if real spending per visitor rose back to its 2019 level, tourist spend would be up a healthy 22.4%.

The point about all this is that higher volumes of tourists aren’t enough, it’s boosting “the value of each visit [that’s] key to unlocking tourism’s full economic potential”.