Tourist ‘Spending Gap’ Persists in West End, Undermining Recovery of Visitor Numbers

  • New West End Company data reveals that a persistent ‘spending gap’ emerged in London’s West End across 2023, even as international visitors numbers soared;
  • Middle Eastern visitors represented the biggest unrealised opportunity for retailers, with the ‘spending gap’ widest for this affluent demographic;
  • Pressure on HM Treasury builds ahead of the Spring Budget, with promised OBR review cause for optimism amongst affected businesses.

London, 15 February 2024: Figures released today by New West End Company underline the stark impact that the absence of tax-free shopping has had on international visitor spending across the last 12 months. Despite a recovery in visitor numbers to pre-pandemic levels, spending recovery has lagged behind. At its widest in Q3 2023, this ‘spending gap’ saw a gap of 31 percentage points between international visitors and their associated spending.

The gap persisted in Q4 2023, despite an influx of visitors over the ‘Golden Quarter’. Whilst overall visitor numbers for October to December were level with 2019, international spending was down 15%. Full year figures reveal an even starker picture: whilst international visitor numbers in 2023 were just 4% below 2019 levels, spend was down 19%.

The widest ‘spending gap’ was amongst affluent visitors from the Gulf, including those from Saudi Arabia, the UAE, Qatar and Kuwait. There were 39% more travellers from the region in the last three months of 2023 compared to the same period in 2019, but spending increased by just 6% -  a gap of 33 percentage points. The full year figures for this demographic paint a similar picture; visitor numbers were up by 20% but spending was down by 10% - a gap of 30 percentage points.

That trend is replicated by visitors from other major tourism markets, such as the USA. Over the course of 2023, 8% more Americans visited London, but they spent 14% less whilst here. These gaps are particularly concerning for the U.K., as they are not present in the European Union, where countries such as Italy, France and Spain offer tax-free shopping. According to Q4 2023 data from Global Blue, US spend in Spain was up 179% compared to 2019, and up 143% in Italy. Similarly, spend from GCC visitors in Q4 2023 was up by 148% in Italy and 132% in France, versus Q4 2019.

Dee Corsi, Chief Executive of the New West End Company, comments:

The persistence of a ‘spending gap’ across 2023 should sound alarm bells in Westminster – whilst Italy and France are actively leveraging tax-free shopping as a driver of growth, British businesses trade at a disadvantage.

“Tax-free shopping presents a rare, golden opportunity for the Government to inject a shot of growth into the economy, with a tried and tested scheme and a captive audience which, for the first time, would include 450 million E.U. residents.

“What is more, it would allow us to maximise the returns of existing infrastructure, such as the recent launch of the ETA visa for GCC visitors. The Government has already invested in incentivising visitors from the Gulf to travel to the U.K. – why not incentivise them to spend in our shops while they are here too?

“We are still within the window to capitalise on this opportunity, with businesses across the country united in their desire to see tax-free shopping reinstated. The news that the OBR will look at the impact data is a welcome acknowledgement, at the highest levels, that our calls are being heard. We are hopeful that the Spring Budget will see these calls answered.” 

In 2023, annual sales in the West End exceeded previous forecasts, coming in at £9.0 billion and underlining the area’s continued resilience in the face of challenging economic headwinds. Despite this, sales remain slightly down compared to 2019 levels (-1%), with international sales – a key driver of growth – failing to compensate for squeezed domestic spend.

This is having a knock-on effect on West End businesses; an earlier survey of retail, hospitality, leisure and F&B providers in the district found that 92% said they had been affected by the loss of tax-free shopping, a much higher proportion than those affected by the cost-of-living crisis or inflation (both 58%).

The survey also revealed that businesses were taking proactive measures to mitigate the impact of tax-free shopping. Over half (54%) confirmed their business was reviewing future U.K. investment strategies, with a similar proportion (48%) reconsidering staffing requirements to manage costs.