The chancellor must reinstate tax-free shopping this Christmas, says New West End Company chief executive Dee Corsi

Regent Street Christmas lights

Tourists are returning to London’s West End but are spending less than pre-pandemic

For many, Christmas begins in the West End. The iconic lights installation on Oxford Street was the first big display to switch on in London, marking the official commencement of the festive season for visitors.

For businesses, it also marks the start of the all-important festive trading period in the district, long seen as a bellwether for retailers and hospitality providers across the UK.

The good news is that our forecasts indicate the West End can expect a marginal year-on-year boost, with consumer spending set to reach up to £1.6bn in the final months of 2023.

“International spending peaks on Boxing Day, after the spikes in domestic spending have taken place”

That this is set to occur against a challenging economic backdrop is a reflection of the West End’s reputation as being more than just a shopping district but a retail and leisure destination, too. The West End’s unique variety of experiences, open to everyone, is what makes it shine at Christmas time.

That said, should we wish to ensure growth in the years to come, we cannot afford to ignore underlying shifts in shopper behaviour.

We face another year of cautious domestic shoppers as Brits tighten their belts due to inflationary pressures. Recent research from PwC found that one in three will spend less this festive period, which aligns with our forecast.

We need the chancellor’s support

Our data indicates there will be twin priorities for the domestic shopper this year: savvy spending and investment in the experience economy. We expect to see the first spike in domestic spending on Black Friday when shoppers seek out deals and discounts in person.

Domestic spending will reach its peak on December 23. On the last Saturday before Christmas, it’s likely that visitors will be looking to make the most of festive experiences before heading homeward. Santa’s grottos for children and puppies alike, roaming entertainment, exclusive ‘Magic Days’ promotions and, for the first time, an ice rink nestled in Hanover Square are just a few of the experiences that promise to deliver unforgettable Christmas memories.

But with domestic shopping patterns largely unchanged from last year, it will not be British consumers driving topline growth this year – it will be international shoppers.

“The gap between international visitor numbers and levels of spend is growing quarter on quarter – from 1% in Q1 to 31% in Q3”

The recovery of international visitor numbers has been steady across the year and it is this return to the capital that is set to boost spending. Beyond hitting the shops, we know they will also be looking to soak up the West End experience for the whole festive period – international spending peaks on Boxing Day, after the spikes in domestic spending have taken place.

That it’s international visitors driving growth this winter is testament to the enduring appeal of the West End – particularly at Christmas time when the district is lit up by festive magic. But that should not obscure the fact that the lack of tax-free shopping continues to act as a drag on growth for our businesses.

Data we released this week shows the gap between international visitor numbers and levels of spend is growing quarter on quarter – from 1% in Q1 2023 to 31% in Q3.

The gap is particularly pronounced for Chinese visitors who have recently started to return after the Chinese government lifted a ban on group tours to the UK. The number of Chinese tourists visiting London is down 29% compared to 2021 but, worryingly, their spending is down 67%.

With businesses set to face more economic headwinds in the new year, including potential business rate rises, it is critical that the chancellor, Jeremy Hunt, does all he can to ease their burden.

Reinstating tax-free shopping is a simple measure that would put British businesses back on an equal footing with their European counterparts again. Doing so would be one of the greatest gifts the British economy could receive this Christmas – let’s not delay it any longer.