London has always survived on its charm. Not just the postcard beauty of Big Ben or the choreographed pomp of the Changing the Guard, but the less glamorous magic too: the queues outside Selfridges in December; the Japanese influencers photographing éclairs in Soho; the delighted Texans discovering that, yes, the Tube really does go everywhere.
That quiet hum of people spending money simply because they’re here. Tourism is one of the capital’s most reliable lifelines — an economic IV drip that keeps restaurants busy, theatres packed, and hotels turning beds at a healthy clip.
Which is why it feels rather extraordinary that both central government and City Hall appear intent – perhaps accidentally, which is somehow worse – on throttling that very lifeline.
First came the abolition of tax-free shopping for international visitors. A decision so baffling, so economically incoherent, that it united luxury retailers, economists, hoteliers, restaurant owners, and just about anyone who has ever met a high-spending tourist in their life. Mulberry’s CEO Andrea Baldo has been quite clear: sales have slumped, international footfall is down, and London has handed a gilt-edged advantage to Paris, Milan, Madrid – anywhere that still greets wealthy visitors with a smile and a VAT refund slip.
Retail bosses have warned the Treasury repeatedly – and extremely politely, which you have to admire under the circumstances – that scrapping VAT-free shopping has shoved the UK into a “massive global disadvantage”. That’s not the language of ideological grandstanding. That’s the language of people counting receipts and noticing that the receipts have fewer zeros on them.
And now, just as the sector is trying to absorb that blow, along comes London Mayor Sadiq Khan with an entirely different sort of “tourist tax”: a proposed nightly levy on hotel stays.
Brilliant. Inspired. Because nothing says “Welcome to London, please spend liberally in our struggling hospitality sector!” like slapping visitors with another charge the moment they collapse onto crisp white sheets after an eleven-hour flight.
It’s worth saying, in fairness, that tourist levies exist in other cities – Venice, Paris, Barcelona – and no one doubts that London needs investment in infrastructure. But the timing could not be worse, nor the logic flimsier. London is not Venice, with its crowds of cruise-ship day-trippers who contribute little. Our visitors stay, they eat, they shop, they go to the theatre. They fuel whole ecosystems. They are, in essence, ideal customers.
And yet we treat them like they’re bringing in a contagious disease.
The abolition of VAT-free shopping already chased some of the highest-value visitors elsewhere. Now a new nightly charge risks pushing the merely comfortable travellers – the business guests, the conference attendees, the families doing the long-saved-for summer or easter holiday – to think twice. Or to think: “Paris looks nice.”
And here’s the maddening bit: all of this is avoidable.
Every retailer on Bond Street, every restaurateur in Mayfair, every hotelier in Westminster will tell you the same story: international visitors are not a “nice to have” – they are the economic engine that keeps the hospitality sector alive. Remove their incentives to come, and the whole thing falters. Add disincentives, and it falters faster.
The government’s refusal to restore VAT-free shopping is already estimated to cost the UK billions in lost retail, transport, and hospitality revenue. The Treasury insists its sums say otherwise, but the Treasury also once insisted HS2 was under control, so forgive the industry for taking Whitehall maths with a generous pinch of Maldon sea salt.
Meanwhile, Sadiq Khan’s proposed levy feels like a political manoeuvre masquerading as tourism policy. It sounds bold, it raises a neat chunk of money, and it gives City Hall an easy headline: “Tourists to fund improvements to London.” But this is the hotel sector we’re talking about – an industry still nursing the bruises of a pandemic, grappling with staff shortages, inflationary pressures, and a chronic lack of long-term certainty.
Add yet another financial deterrent for visitors and the whole Jenga tower wobbles again.
Business travellers will feel it most sharply. London’s MICE sector relies on predictable budgets, competitive rates, and the sense that the capital remains the place to convene. Add a levy – today £2 or £3, but inevitably creeping up – and suddenly CFOs start asking awkward questions. Can the event be held in Lisbon instead? Does the team need to travel at all? Should this year’s European summit take place somewhere that isn’t constantly inventing new ways to make visitors feel unwelcome?
The irony is overwhelming: London spends millions promoting itself globally as dynamic, open, and world-leading – while simultaneously closing the door an inch at a time.
No one disputes that London needs funding for infrastructure. No one doubts the value of reinvesting in transport, culture, street cleansing, safety, community improvements. But you do not strengthen the foundations of a world-class city by sawing away at the beams that hold up its economy.
You certainly don’t do it by penalising the very people who come here to spend.
London’s hospitality sector is more than a collection of hotels, restaurants and stores. It is one of the city’s most powerful ambassadors. And right now, it’s being asked to thrive while tied to a radiator, whilst some of its diners inject their portion-reducing Ozempic.
If central government and City Hall truly want London to remain unmatched as a global destination, the answer is simple – stop taxing the tourists to death.
Restore VAT-free shopping. Rethink the hotel levy. Support the sector instead of squeezing it. Because if we don’t, visitors will go where they’re wanted. And London will be left wondering how, in the name of economic competence, we managed to become the city that priced itself out of the world.