Heathrow has accused Rishi Sunak of having ‘shut the door’ on home grown growth when he introduced the ‘tourist tax’.
The Prime Minister axed a tax-free shopping scheme for international visitors in 2020 when he was Chancellor, despite an outcry from many leading firms.
Now he is facing pressure to announce a U-turn after businesses said they are missing out.
Yesterday, Heathrow, the largest airport in Europe, warned that the UK’s reputation was on the line, and it accused the Prime Minister of ‘turning away international shoppers’.
It is one of hundreds of firms urging Chancellor Jeremy Hunt and Sunak to scrap the tax at the Spring Budget next month.
Under fire: Rishi Sunak axed a tax-free shopping scheme for international visitors in 2020 when he was Chancellor, despite an outcry from firms.
A Heathrow spokesman yesterday said: ‘While exports are thriving, Britain has shut the door on home grown growth, turning away international shoppers through the tourist tax and tarnishing the UK’s reputation as a competitive country to spend and do business with.’
More than 400 prominent business leaders have called for the Government to U-turn, as part of a campaign by The Mail.
In a victory for The Mail, the Government’s economic watchdog the Office for Budget Responsibility has opened a probe into whether reintroducing tax-free shopping will cost more than it raises.
Heathrow’s comments came as it said 6m travelled through the airport in January, up 9.4 per cent compared to the start of 2023.
But data shows that while tourists are returning to the country after Covid, they are holding back on spending compared to other European countries.
Heathrow warned that global retailers are swerving the travel hub due to the tax and instead are setting up shops in Paris, Amsterdam and Milan airports.
In May, the airport said that it was forced to shut 18 stores run by luxury designers, including Mulberry and Rolex, ‘as a direct response’ to the tax.
Daniel Platt, public affairs lead at Heathrow added: ‘We still have shuttered stores, we have space that retailers are not willing to take up, which is not a situation we found ourselves in 2019.
‘The UK’s competitiveness has eroded since 2021. High spending visitors have turned to European competitors and taken spend there.
Chinese passengers in particular have voted with their wallets, not necessarily with their feet, but they are spending less.’
Heathrow’s stark words echo other industry warnings that the UK is losing its competitive edge on rival destinations such as Paris and Lisbon.
Concerns: Terminal 5 at Heathrow. The airport is calling on the government to scrap the so called ‘tourist-tax’ at the Spring Budget next month.
Bosses argue the impact of the levy is being felt outside luxury fashion spots Bond Street and Bicester Village, with transport providers, restaurants and museums also hit.
Ministers have tried to dismiss the concerns of business leaders by arguing tax-free shopping benefits only luxury brands and the most affluent tourists hunting for a bargain.
But fresh analysis called into question the Government’s earlier calculations about the economic consequences.
The Centre for Economics and Business Research last week suggested the tax was costing the wider economy more than £11billion as wealthy tourists divert to cities such as Paris, where tourists can shop tax-free.
A string of business leaders have spoken out against the levy, including Neil Clifford, the boss of luxury footwear brand Kurt Geiger, who described it as a ‘schoolboy error’.
Clifford told The Mail last week: ‘Those international visitors are just spending a lot more time in other cities.’
Fashion designer Sir Paul Smith said the campaign to scrap the tax was not about ‘helping rich shoppers coming to buy cheap handbags’ but boosting the wider economy.
But the Treasury claims reinstating the perk would cost the Exchequer £2billion a year.