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May 26, 2023
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New data shows end of UK VAT-free shopping again boosts Europe

Published
May 26, 2023

The UK government has been asking for evidence that the end of the VAT-three shopping perk for tourists is hurting British retail and payment software specialist Planet came up with some of that again on Friday.


Photo: Pexels/Public domain


Following its data covering the month of March, its figures for April, also showed that UK retail is missing out as Chinese and American shoppers in particular become ever more active in mainland Europe.

Some 55% of Chinese spending is now going to France, its figures show, with italy in second place on an 18% share. And that spending is significant with the average spend at €1,366 per transaction. 

And American spending increased again in April, which means it's now double what it was as recently as February with spending of around €1,150 per transaction. Again, France is the top destination and accounts for 52.5% of this. And who’s in second place? Italy again, in this case with a 25.2% share.

The data also showed that on 21 April in particular, average daily spending by shoppers from Gulf nations in European stores offering tax refunds increased nearly fourfold. That was because it was Eid al-Fitr, the day that marks the end of Ramadan, Islam’s holiest month.

Overall, Planet said that sales in Europe were at close to record highs compared to the pre-pandemic period, even with that holiday-related pause from Gulf nations over the Ramadan period last month.

The US held on to its position as the top spending nation with a total 19.8% share of all VAT-free spending, followed by China in second place on 12%, and Asian tourists now account for 40% of all sales in-store across Europe. 

Chinese spending in particular is bouncing back, following the ability of these luxury-focus consumers to travel abroad after the removal of Covid restrictions. Only nationals from Hong Kong and Singapore spent more per average transaction than Chinese shoppers.  

And the potential for growth is huge. There’s no guarantee that it will get back to pre-pandemic levels as some Chinese shoppers may decide to spend more on luxury within their own country or within Asia. But Chinese spending being still 72% below, where it was before Covid means Europe is likely to see that spending increasing for the foreseeable future. 

That 55% of Chinese spending, that's now going to France as mentioned earlier, is up 29% compared to a year ago. 

And it's perhaps significant that it's not only the very youngest and travel-focused consumers who are spending. This time last year Gen Z accounted for roughly 40% of sales, but this year that was only 10% with Gen Y — aka Millennials — jumping from 44% to 66% during the period.

AMERCIANS ARE SPENDING HEAVILY

Several luxury firms have mentioned lately that luxury spending in the US has dipped this year, and that's perhaps no surprise given that Americans are enthusiastically travelling and spending in Europe. Shoppers from the world’s largest economy “were the driving force behind the recovery of European tax-free shops last year and their spending continues at pace, far above the levels seen in 2019”. 

In fact, this trend is so marked that sales to US customers for the year to date are now 85% above pre-pandemic levels and 74% higher than they were during the same period last year. These are spectacular figures.

And as well as France and Italy, US shoppers are also the dominant force in Spain.

Clearly, the potential for the UK to grab some of this shopping if tax-free shopping was reintroduced is enormous. Given that EU shoppers aren't able to spend tax-free within such countries, Britain also has an extra potential advantage in that shoppers from France, Spain, Italy, Germany and more would also be likely to tr
avel to the UK.
Luca Cassina, President of Retail at Planet, said that the company is delighted to see, continued strong growth in Europe, but the figures highlight the need “to put UK retailers back on a level playing field with their European counterparts through the reintroduction of the tax-free scheme. We know that UK retailers would also welcome the revenue boost that these high spending visitors would deliver. 

“We’d love to see international shoppers able to have a full choice of where they do their tax-free shopping when they come to Europe, and with such a strong business case already made to re-introduce the scheme in the UK, the time to act and deliver is now. We continue to work in partnership with the industry to encourage a change of thinking.” 

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