Tourists deterred from visiting UK ‘by high taxes and lack of investment’

Britain expected to have one of the lowest growth rates in visitors among major tourist destinations

View of London from the Southbank shows London Eye, Big Ben, Houses of Parliament. Getty Images

High taxes and a lack of investment are putting off tourists from visiting the UK, a report has found.

Britain is expected to have one of the lowest growth rates in overnight international arrivals among major tourist destinations, consultancy Oxford Economics has said.

It forecasts an increase in annual arrivals from last year to 2029 of just 3 per cent for the UK, compared with 4.9 per cent for Spain, 5.7 per cent for Italy, 7.4 per cent for Japan and 9.1 per cent for Australia.

Britain’s failure to attract tourists could result in the UK missing out on up to £60 billion ($73 billion) of gross domestic product output over the next 10 years, according to the World Travel and Tourism Council (WTTC), which commissioned the report.

WTTC said the tourism sector is being hampered by factors including the increase in National Insurance contributions (NICs) paid by employers in the 2024 autumn budget; a higher VAT rate than the European average; increases in Air Passenger Duty, representing an extra £2 for economy tickets on short-haul flights and 50 per cent for private jet passengers. Other factors include the launch of the UK ETA scheme, a £10 digital permit for international visitors without a visa; and the refusal to resume tax-free shopping for tourists.

Tax-free shopping for international visitors was scrapped in January 2021 by the previous Conservative government, which predicted the move would provide revenue worth an estimated £2 billion for the UK Treasury.

However, estimates suggest it actually resulted in the loss of about two million visitors. Research from Global Blue predicted that the economy missed out on up to £4.3billion in spending last summer due to the tourist tax.

By 2022, spending by American visitors to the UK had climbed to 101 per cent of 2019 levels. But for visitors from Gulf states – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – UK sales remained at only 65 per cent of 2019 levels. VisitBritain predicted that spending by GCC visitors in the UK would return to 2019 levels by 2024 and exceed 2019 levels by 2025.

When all six countries of the GCC are combined, they represent the second most valuable market for the UK in terms of visitor spending, according to data from VisitBritain.

A study by Oxford Economics said reinstating tax free shopping would add £4.1bn to UK GDP, and create 78,000 new jobs across the country. But Labour has not responded to calls to reintroduce it.

Oxford Economics also claimed VisitBritain – which is responsible for promoting the UK as a tourist destination – is “seriously underfunded” compared with its global competitors, many of which “receive double the government investment”.

A skeleton model of a Diplodocus dinosaur is seen outside the Natural History Museum in South Kensington. Getty Images

Chris Bryant, minister for creative industries, arts and tourism, will co-chair the first meeting of the government's Visitor Economy Advisory Council on Monday.

The council has been created to bring industry leaders and government representatives together to support tourism growth.

Those attending will include Julia Simpson, who is president of the WTTC and was an adviser to Tony Blair during his time as prime minister.

“The UK is at a critical juncture. The government is looking for growth, and its travel and tourism sector offers just that,” Ms Simpson said.

“As one of the country's largest employers alongside the NHS, contributing £280 billion to the UK economy last year, the sector has been misunderstood and poorly treated by successive governments.

“The government cannot tax its way out of debt, it needs to invest to grow. UK taxes are higher than many of its competitors, making the UK expensive to operate in and expensive to visit.”

The British Museum. Getty Images

Ms Simpson said it is “arrogant to think tourists will always come to the UK”, adding that the government has “a unique opportunity to change the trajectory of travel and tourism” in the country.

A government representative said it was “committed to supporting the UK's world class tourism industry” to flourish, through its Plan for Change, which aims to deliver a decade of national renewal.

“That is why in November we announced our ambition to reach 50 million visitors to the UK each year by 2030, and we've established the Visitor Economy Advisory Council to co-create a growth strategy for the sector, to be launched this autumn,” added the representative.

“We're pleased that the WTTC will play a key role in the council alongside other industry leaders to help co-create the strategy and support the growth of UK tourism.”