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Brits are swapping London’s glittering storefronts for Paris’ grands magasins and Milan’s Quadrilatero della moda — and the numbers behind the luxury exodus are startling.

Since tax-free shopping became possible for UK visitors in the EU after Brexit in January 2021, British consumers have increasingly directed their high-end spending towards brands and stores across the Channel.

According to a recent report published by the Association of International Retail (AIR), Britons shelled out €854 million (£730mn) on VAT-free shopping in the EU in 2024, a five-fold leap from €169mn in 2021.

“This is not the same people spending a bit more — it’s a whole new shopping-led tourism market spending additionally on hotels, travel, restaurants, etc.,” the AIR report stated.

When the UK left the European Union, its shoppers became non-EU visitors or third-country travellers and instantly became entitled to VAT-free shopping.

According to the EU’s VAT directive, retailers in the bloc must provide shoppers with the option of reclaiming no less than 15%, with most countries applying an average rate of 20%, of the cost of the item. This can be particularly appealing when it comes to high-end or luxury items.

Say you decide to buy the TikTok-viral Loewe Puzzle Bag during a trip to Paris or Spain. The small one retails at around €3,600 and the large one is currently priced at around €4,200, according to prices listed on Loewe’s official website.

With the VAT returns, you would get €700 back for the small bag and €840 for the big one. Suddenly, a weekend trip to the continent might seem more appealing.

“So, they are spending hundreds of millions of additional euros on hotels, restaurants, transport, fun… at Britain’s expense,” the AIR report added, highlighting the blow to UK tourism.

According to the Paris Tourism Office, there was a 44% spike in visitors from the UK visiting the French capital in 2023, the highest increase among European tourists in the ranking.

No VAT-free benefits in the UK

When the UK left the EU in January 2021, it proceeded to abolish its previous VAT scheme, citing cost and complexity.

This made the UK the only major global shopping destination not offering VAT-free shopping to any international tourists. The only way you can currently buy VAT-free goods in the UK is if they are bought online and shipped directly to an address outside the UK.

Northern Ireland has retained a VAT-free scheme, meaning that if you purchase goods there as an EU citizen and fly out within three months, you will get your VAT tax returned to you upon leaving.

Even big-ticket items people buy at the airport — such as in the stores in the duty-free area — were stripped of the VAT-free status. So for UK travellers who would usually purchase laptops, smartphones or designer cosmetics at the airport, largely the same prices apply as the ones they pay in stores at home. Alcohol and tobacco purchases are exceptions, as these can be bought duty-free.

Luxury retailers are furious

Britain’s luxury lobby is unhappy about the tax changes.

Walpole — the official body representing Britain’s luxury sector including Rolls-Royce, Burberry, and Harrods — published a study in May, claiming that luxury exports to the EU were “up to 43% lower than they may have been without Brexit”.

In the fashion and accessories sector alone, Brexit incurred a 64% loss.

“This points to a substantial ‘Brexit effect’ on this industry which supports over 450,000 jobs and contributes £14.6 billion (€16.8bn) to the Exchequer” the report continues.

Crucially, British luxury brands are not just losing sales to European rivals, they are also watching demand for UK-made goods slump across the EU and global markets.

The luxury industry is uniquely dominant in Europe’s history, having emerged from centuries of craftsmanship and artisanal work matched with the latest developments in artistry and design.

“Luxury is a global phenomenon, but it calls the UK and Europe its home,” Walpole CEO Helen Brocklebank said in a statement.

The EU currently produces 74% of global luxury goods, and 62% of those goods are exported outside the EU, according to the European Commission — a profit opportunity the UK luxury industry is missing out on.

“The British luxury sector has incredible growth potential, with a projection to reach £125bn (€144bn) by 2028,” Brocklebank continued.

“However, to achieve this ambition, we cannot afford to have one arm tied behind our back. Strong links and favourable trading with Europe remain essential to reaching this forecast, alongside our success in other global markets and key to supporting craft-led and high value manufacturing in the UK.”

Brands report that delays, surprise courier fees and inconsistent border checks have pushed EU customers to rival European labels and left a trail of negative reviews for UK brands, leading to a confidence shock on the continent that brands are not able to quell on their own without policy changes.

They claim that the EU market is not replaceable, namely that they cannot just pivot to another market that would match the demand.

Continental Europe is both their biggest customer base and the linchpin of their supply chains, with brands sourcing many leathers in Tuscan tanneries and continental brands buying from Scottish cashmere mills for their own products.

“At a time of global uncertainty and trade challenges, the Government must seize the opportunity to smooth the trade barriers with our closest and largest trading partner,” Brocklebank continued.

Apart from the UK-EU relations, luxury sales have faced additional challenges from rising US tariffs and reduced consumer demand in China.

Brits love their luxury

A YouGov poll shows there is an appetite to spend more on luxury. According to a 2024 study, a quarter of Britons bought a luxury product in the previous year and 45% of those shoppers say they are happy to pay extra for premium brands. More than half spent up to £500, while 9% blew through £5,000.

More than a third or 34% of luxury shoppers say they are likely to spend the same amount on luxury goods this year, compared to the previous year.

So until Westminster considers relaunching some form of VAT-free equivalent benefits, every swipe of a British card in the EU may ring up another missed sale at home.