Chancellor warned foreign shoppers will desert UK if duty-free is axed

The Chancellor is under renewed pressure to reinstate duty-free shopping after the Office for Budget Responsibility (OBR) revealed how little it would save.

Earlier this year Rishi Sunak announced he would end VAT refunds for international visitors to British shops from January 1.

The Treasury claimed the move would save up to £500million per year, but the OBR said it would save £195million next year.

A shopper stocks up at Bicester Village in Oxfordshire in June. The designer outlet retail park i popular with foreign shoppers from all over the world. But duty-free is set to end on January 1

That has sparked fears that shoppers will go elsewhere instead of the UK.

Michael Bonsor, at the five-star hotel Rosewood London, said: ‘The decision to scrap tax-free shopping doesn’t add up and puts thousands more jobs at risk.’

Helen Dickinson, at the British Retail Consortium, said: ‘We were disappointed the Chancellor did not reverse the decision.’

The OBR found the amount saved by the Treasury will average of £360million per year between 2021/22 and 2025/26.

The Treasury said savings in the first three years are smaller as a result of fewer passengers.

It added: ‘Extending this scheme to the EU [after Brexit] would mean subsidising a large amount of spending from EU visitors at a cost of up to £1.4billion a year.’