Press release: London property sector calls for return of tax-free shopping

13 Jun 2023

Latest Global Cities Survey shows London risks falling behind global rivals in attracting international visitors

 The London Property Alliance (“LPA”), which represents the UK capital’s leading real estate developers and investors, has called on Government to look urgently at how to reinstate VAT-free shopping for tourists with its latest Global Cities Survey showing that London is lagging its global rivals in attracting international visitors post-pandemic.  

The Global Cities Survey analyses the performance of leading global cities London, New York, Hong Kong, Paris and Berlin across a range of indicators, including job vacancies, air passenger numbers, office rents and vacancy, public transport usage and Air BnB occupancy.

The latest edition of the survey shows despite the boost of the King’s Coronation and events such as the Chelsea Flower Show, the number of international visitors is recovering more slowly than other leading global cities.

Analysis for the first quarter shows that air passenger numbers in New York hit 32 million in the first quarter, up 4% on pre-pandemic levels. In Paris air passenger demand is currently at 90% of 2019 levels, with London just behind at 89% – although the major international hub at Heathrow is slightly ahead at 95%. Hong Kong, meanwhile, has recovered to just 43% of pre-pandemic levels following the lifting of all COVID-19 travel restrictions.

London is also trailing some of its rivals in Air BnB occupancy, a key indicator of tourist demand. After a seasonal fall in Q1, occupancy in London reached 65.4% in April, in line with New York (65.7%) but significantly behind Paris (77.6%) and Berlin (76.7%).

Despite the uneven return of tourists, data suggests London remains one of the highest profile and most talked about cities. An analysis of social media ‘visibility’ by ING Media shows London received 31.4m mentions in the first quarter, up 43% year-on-year and second only to Paris (36.1m) which has been buoyed by the upcoming Olympic Games. New York saw its visibility decline 8.7% year-on-year in the first quarter (from 33m to 31.4m), but remained ahead of Hong Kong (12.9m) and Berlin (8.29m).

While the return of international tourists has been slower that some of its rivals, London is recording a strong rebound in public transport ridership, indicating a return of commuters and domestic visitors.  Passenger numbers for the London Underground reached 89% of pre-pandemic levels in Q1 2023, compared to just 69% for the New York subway and 84% for the Hong Kong rail system. It is expected that usage of the London Underground will return to pre-pandemic levels during Q3 of this year, and the Elizabeth line alone will support 100 million passenger journeys. However, London is behind Paris, where the metro and RER A/B systems exceeded pre-pandemic levels (up 14% on 2019) in Q1.

Analysis from Oxford Economics shows that while London is expected to narrowly avoid a decline in economic output in 2023, and achieve a rise of 0.42%, the economic outlook for Paris (forecast 0.98% increase) and New York (1.24%) is brighter. At just under 9%, the UK also has the highest rate of inflation amongst its global peers, with rates falling below 6% in France, 5% in the USA, just over 7% in Germany and 1.7% in Hong Kong.

Alexander Jan, Chief Economic Advisor to London Property Alliance, commented:

 “Despite an uncertain economic outlook, London continues to rebound strongly following the pandemic, boosted by the opening of the Elizabeth line, a wider recovery in public transport ridership and the return of workers to the city centre.

 “However, tourism is vital to London’s economy and despite its status as a leading global destination we are seeing an uneven return of international visitors and are now falling behind other global cities.

 “The Government must urgently consider how to reinstate tax-free shopping, which gives a major advantage to other European cities, and also look again at how to reform business rates to support a diverse mix of retail, hospitality, culture and nightlife in the city centre.

 “Moreover, London needs more devolved powers to enable more investment into active travel and green public realm to enhance the visitor experience and bolster our credentials as a leading sustainable city.”


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Read: Global Cities Survey (June 2023)