The chancellor is facing renewed pressure from the retail industry to reintroduce tax-free shopping for tourists. The scheme allowed visitors from non-EU countries to recover the VAT on purchases bought within the trip but was withdrawn by the Treasury on December 31, 2020, during the pandemic.

Last autumn, when Jeremy Hunt said he would keep the 20 per cent levy in place, the Treasury estimated that the so-called tourist tax brings in about £2 billion a year to the exchequer.

But the decision to scrap tax-free shopping has had significant implications for the likes of Harrods, Selfridges, Liberty, and Fortnum & Mason — all popular tourist hotspots.

Michael Ward, managing director of Harrods, said the removal of the scheme was “a self-inflicted wound on the British economy. Without the scheme, we are lagging behind the rest of Europe — look at the spending of the American and Middle Eastern visitor in Paris compared with London and it is very clear that the UK is being left behind when it comes to the recovery of international tourism.”

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