Written evidence submitted by Global Blue (UK) Ltd


Submission to the Digital, Culture, Media and Sport Select Committee “Promoting Britain Abroad” Inquiry by Global Blue (UK) Ltd.

Digital, Culture, Media and Sport

Select Committee

Promoting Britain Abroad Inquiry

House of Commons


SW1A 0AA                                                                                                                 6th January 2022


Dear Committee,

Global Blue is the strategic technology and payments partner empowering merchants to capture the growth of international shoppers through Tax Free Shopping solutions, smart data and business intelligence, targeted marketing solutions and added-value payment solutions. We operate these services across 40+ countries and help more than 29 million international shoppers receive a seamless and personalised shopping experience.

Due to the nature of our business, I will only reply to selective parts of the call for evidence.

Question 1 – Re-establishing the UK as a holiday destination.

It should be noted, and not underestimated, that there is a critical importance that shopping plays in the overall holiday experience for many international tourists. Obviously, the UK has many cultural and natural attractions that visitors come for. However, for many, and particularly for high-value visitors, shopping is an integral part of their trip. Furthermore, it is shopping that accounts for the greatest proportion of all spending by international visitors, especially among non-EU travellers.


On 31st December 2020 the UK government withdrew the tax-free shopping scheme, known as the VAT Retail Export Scheme (VAT RES).


Tax-free shopping schemes are consistently shown as being of fundamental importance in order to attract tourism and spend to a country and the UK is no exception. For many UK retailers, the sales that they made to international travellers formed a significant part of their business, in some cases this was more than 50% of their turnover.


As an example, in order to take advantage of the UK’s decision, France decided to reduce their Minimum Purchase Amount that qualifies for tax-free shopping from €175 to €100 with effect from 1st January 2021 in order to attract more tourists to visit them as they understand the important driver that shopping is.


In 2019, 16m non-EU visitors to the UK spent over £3 billion on tax-free shopping. Additionally, those same visitors spent a further £13.8 billion on other goods & services that raised almost £3 billion in VAT.


When withdrawing the scheme in the UK the government claimed this would have no impact on visitor numbers or spend. This was not supported by the OBR in their ‘Economic and Fiscal Outlook, November 2020’ publication. The OBR estimated that removing VAT RES would result in a fall of 38% in retail sales to non-EU visitors. That amounts to over £1 billion and will make it significantly more challenging to meet the government’s target to return international visitor spend to 2019 levels. Additionally, the Treasury Select Committee has called for an independent impact assessment into this policy decision to determine the effect of the abolition.


If there is a fall of greater than 15% in the spend on goods & services that visitors pay VAT on, this will wipe out the government’s claimed saving from abolishing VAT RES and make the UK worse off overall.


Finally, a consumer survey carried out by The Treasury itself concluded that VAT RES had a strong influence on the decision making process of which countries to visit for international visitors.


Recommendation – DCMS Select Committee should support the call of the Treasury Select Committee to have an independent impact assessment carried out on the decision to withdraw VAT RES in the UK.


It is not only high-value visitors that see shopping as an attractive element of their overall holiday experience and it is not only London that benefited from this. The geographical use of the scheme was across the whole of the UK, including Northern Ireland. Whilst it is true that the majority was in London, this is by definition the centre of most retail and tourism. However, other areas attracted their share of the market too. It should not be ignored that these other areas realised meaningful volume in their areas and shops. We saw transactions from every part of the UK, including diverse places such as Portsmouth, Cornwall, Birmingham, Belfast, Cardiff, Peterborough, Stratford-upon-Avon, St. Andrew’s, Hebrides, etc. Edinburgh, in particular, has made significant investment across both the high street and airport to attract international visitors, especially Chinese.


85% of those taking advantage of the VAT RES were ‘infrequent’ visitors, meaning they shopped during less than three trips in a two year period. 13% were ‘frequent’ visitors, shopping during at least three trips in a two year period and 2% were ‘elite’ visitors, spending an average €55,000 during a two year period.


So, whilst the vast majority of people taking advantage of VAT RES were lower value, it should be noted that 15% of shoppers (the frequent & elite who are the high value, multi-trip, visitors) accounted for 42% of the spend on tax-free shopping. These are high value tourists that brought considerable value to the UK.


To focus on those visitors from the Gulf States for example; whilst not high in numbers, they bring considerable spending power with them and are exactly the type of visitor that the UK will benefit the most from.

Unfortunately, the government withdrawing tax-free shopping in the UK makes the UK considerably less attractive to these types of visitors. Whilst COVID-19 is still depressing traveller numbers, making comparisons and trends more difficult, it should be noted that we have already seen Gulf States residents disproportionately spending their money in France and Italy during 2021. Indeed, this group alone are spending 140% of what they spent in 2019; showing a latent pent-up demand.

Most worryingly for the UK is the fact that this overperformance of the Gulf States shopping in Europe is a partial reallocation of their spend that was previously made in the UK. We know this since we hold passport data to facilitate VAT refunds and we see the same individuals now switching their spend to mainland Europe.

The government’s decision to withdraw tax-free shopping is directly benefiting our closest competitors, being France and Italy, since travellers are moving their spend to them.

Recommendation – UK government should urgently reintroduce tax-free shopping.

Question 2 – Does the Tourism Recovery Plan go far enough to support industry’s recovery from the Covid-19 pandemic?

It was very surprising that the Tourism Recovery Plan made no mention of the importance of shopping as a key driver for international visitors. This seems both shortsighted and a failure to properly understand all the dynamics that drive these visitors.

The Committee should note that Non-EU shopping tourists are highly mobile and price sensitive.

In September 2020, following the government’s announcement of its intention to withdraw the VAT RES scheme, Global Blue sent a survey to international shoppers who had used the tax-free scheme in the preceding 24 months. 5,000 responses indicated the following:-

The Tourism Recovery Plan should recognise the importance of shopping and identify actions that would support the attractiveness of the UK to facilitate this desire among visitors. The plan should be segmented to target those visitors of most potential value to the UK.

Chinese shoppers, for example, represent a huge opportunity to support the UK recovery and future growth, but without tax-free shopping it will not be realised. The Chinese are the world’s biggest tourist spenders, they are the fastest growing international visitor group by numbers and VisitBritain says “going shopping is the number one activity which most Chinese visits will feature”.

KPMG said in 2020, ”Chinese tourists are prolific shoppers but they are highly price sensitive. Eliminating Tax and Duty Free Shopping in the UK would be a massive own goal and would prevent
the UK from capturing the significant pent up
spend of Chinese visitors.”

Recommendation government should review and amend the Tourism Recovery Plan to ensure the importance of shopping to international visitors is recognised and that targets are set to recapture previous levels of spend in this area.

Question 3 What should the UK be doing to maintain its status as a ‘soft power superpower’ and further promote its culture and heritage on the global stage?

To maintain this status and further promote the UK’s soft power relies on being an open and preferred destination. Experiencing the UK firsthand creates strong bonds and affiliations.

As stated earlier, the government withdrew the VAT RES scheme that had been enjoyed by non-EU residents and we believe this will act as a strong disincentive to those nationalities where our soft power was making a difference.

However, there are two further elements that the Committee should consider:-

  1. Part of the government’s rationale for the withdrawal of VAT RES was their belief that if they had not done so, they would be obliged to make the scheme available to EU residents too. They believed this would cost too much and decided to take the alternative action of withdrawing the scheme altogether. In fact, this analysis was flawed as it did not take into account the lower levels of spending on shopping that EU residents typically make. Therefore, the costs would have been lower and in fact industry modelling showed there would be a net contribution to the UK if, in fact, the VAT RES scheme had been extended to EU residents through the wider spending on goods & services attracting VAT. This means the UK is not as attractive a destination as it could have been and this will undermine our ‘soft power’ ambitions.
  2. Once the UK left the EU, all UK residents automatically became non-EU residents and therefore eligible to take advantage of tax-free shopping in all countries that offer it. We are already seeing evidence that this is being utilised and, whilst travel is still depressed from Covid-19, UK residents are already spending, on average, ~€5 million per week on tax-free shopping in European countries. So, not only are we hurting our UK retail sector through this cannabalisation of domestic spend, we are offering our European competitors the chance to enhance their own soft power credentials by attracting more visitors who will experience their culture and heritage and take that experience home with them.

Recommendation Reintroduce tax-free shopping in the UK, including an extension to EU residents, to enhance our attractiveness to all nationalities and to capture shopping spend from EU residents that would help mitigate the cannibalisation that is happening due to UK residents shopping tax-free in our competitor markets.

With extensive data sources and insights into the behaviour of the international tourist from over 40 countries, Global Blue would be pleased to assist the Committee with any further ‘deep-dive’ data or evidence that would assist it.

Yours sincerely,


D. Hardman

Managing Director, UK & Ireland.

Global Blue (UK) Ltd