British consumers are increasingly packing their bags for tax-free shopping sprees across Europe, as the UK’s own high-tax environment and scrapped VAT rebates drive both tourists and talent abroad. According to new data from the Association of International Retail (AIR), spending by UK shoppers in the European Union has surged by 16% so far in 2025 compared to the previous year, underscoring a growing trend that’s raising alarm bells among business leaders and policymakers alike.
The roots of this shopping exodus can be traced back to Brexit. After the UK left the EU, British visitors became eligible for the EU’s VAT rebate scheme, which was introduced in 2021. This allows tourists from outside the bloc to claim back value-added tax (VAT) on purchases, providing hefty savings—sometimes enough to offset the cost of Eurostar tickets or budget flights, analysts say. In 2024, Britons spent a staggering £742 million on tax-free shopping in the EU, up from £527 million in 2022, according to AIR figures cited by BBC and other outlets.
"A new market in shopping-led tourism has emerged," said Derrick Hardman, chairman of AIR. "It’s sad to see British shoppers taking their business elsewhere." Hardman’s sentiment is echoed by luxury brands and retailers in the UK, who warn that the loss of VAT-free shopping at home is pushing customers to continental rivals. Burberry and Harrods, two of Britain’s most iconic names, have publicly warned that the current policy disadvantages domestic producers, as shoppers are more likely to buy British-made goods in countries that offer VAT rebates.
The fallout is not limited to shopping. There are mounting concerns that the UK’s broader economic climate is driving away not just tourists, but also the very people who fuel its future prosperity. On August 9, 2025, entrepreneur David Ross wrote about what he described as an “exodus of talent and enterprise” from Britain. The most high-profile departure? John Fredriksen, the Norwegian shipping billionaire and Britain’s ninth-richest man, who announced in July that he was moving to Dubai. Upon leaving, Fredriksen declared, "Britain has gone to hell"—a quote that’s been widely cited in the press and has come to symbolize the frustrations of many in the business community.
Ross, co-founder of Carphone Warehouse, painted a sobering picture of young professionals with first-class degrees from elite Russell Group universities weighing job offers in Dubai, Singapore, and Hong Kong. "These aren’t millennials seeking sun and tax breaks; they’re Britain’s future leaders leaving before their careers have truly taken off," he wrote, as reported by The Telegraph. He described listening to his son and peers compare international salary packages, all from firms based outside the UK. The consequences, Ross warned, go far beyond lost tax revenue: "The ripple effects run deeper than any Treasury spreadsheet can capture." When a figure like Fredriksen leaves, it’s not just the billionaire who goes, but also the entire ecosystem of professional services—family offices, accountants, lawyers—that supported his business.
The UK’s government, now led by Labour, has come under fire for what critics call a “war on wealth creation.” Since taking office, Labour has raised taxes by £40 billion a year in its first Budget—far exceeding the £7 billion outlined in its manifesto, according to the National Institute of Economic and Social Research. The same institute warns that Labour’s economic stewardship has resulted in a £41.2 billion deficit, and the Office for Budget Responsibility projects that the UK’s tax burden will reach a historic high of 37.7% of GDP by 2027-28. Chancellor Rachel Reeves has not ruled out further tax increases, stating, "It would be irresponsible for a Chancellor to do that."
These fiscal policies, critics argue, are making the UK less attractive to both international visitors and its own citizens. The loss of tax-free shopping for overseas visitors, scrapped in 2021, is seen as a self-inflicted wound. The UK is now the only European country that doesn’t offer VAT rebates to international tourists, effectively handing rivals a 20% price advantage. According to AIR, reinstating VAT rebates for EU visitors alone could add £3.65 billion annually to the UK economy and generate more than £500 million in additional VAT revenue for the Treasury. Culture Secretary Lisa Nandy has indicated the government could reconsider the policy, but so far, calls for change have gone unanswered.
Sir Rocco Forte, chairman of Rocco Forte Hotels, noted a shift in travel patterns among foreign visitors. "Foreign visitors who used to stay in the UK and leave laden with parcels are increasingly cutting trips short and spending more time in Europe, where they can still shop tax-free," he told The Times. Campaigners argue the scrapped VAT-free scheme costs the UK around two million international visitors a year and deters spending in British stores, especially on luxury brands.
The debate over Britain’s economic direction is not just about numbers on a spreadsheet; it’s about the country’s global standing and its ability to attract and retain the world’s best and brightest. Ross criticized the Labour Cabinet for lacking private sector experience, noting that of its 32 members, only one has ever started a business. He contrasted this with the legacy of former Chancellor Nigel Lawson, who, in Ross’s words, "understood that governments don’t create wealth – people do." Lawson’s tenure is remembered for reversing Britain’s industrial malaise and fostering a spirit of entrepreneurial dynamism.
Meanwhile, other European countries are reaping the rewards of competitive tax policies. Italy, for example, has attracted 1,186 high-net-worth individuals since introducing its flat tax regime in 2017. Ireland’s tax receipts hit a record €108 billion in 2024. These successes, according to Ross, are no accident: "They’re the result of competitive policies that understand you attract more bees with honey than vinegar."
As the UK government prepares to unveil a new National Visitor Economy Strategy in autumn 2025, aiming to attract 50 million international visitors annually by 2030, the pressure is on to reverse the tide. Some, like Conservative MP Kemi Badenoch, advocate for a more business-friendly approach, promising only to announce policies that are "costed, and clear, or that will save money." Ross, for his part, remains committed to public service in the UK, but he’s clear-eyed about the challenges ahead: "Rather than leave the country, I am committed to doubling down and trying to help tackle the challenges facing us."
The choices Britain makes in the coming months will determine whether it can reclaim its reputation as a magnet for global minds, capital, and shoppers—or whether it will continue to watch as others seize the opportunity.
