For a specific part of the economy, the Covid-19 impact started earlier and will end far later than most others. This will have a direct impact on property owners and their tenants across the UK.
In January, when flights from China stopped, it was bad news for the major UK International Centres, where Chinese visitors are by far the biggest spenders. Since 2018, China has topped the league of tourism spending; 30% of tax-free shopping in London’s West End is by the Chinese. Knightsbridge, Bicester Village, Manchester and Edinburgh have all seen huge increases in Chinese spending over the past 10 years.
As flights shut down through March, the broader international visitor market came to a halt. Last year, international visitors spent more than £6bn shopping, making this Britain’s 12th-largest export sector. Overseas tourists spend far more than other shoppers, accounting for around 25% of the 200 million annual visits to the West End, but around half of the £10bn retail spending. According to Visit Britain, before Covid-19, international shopper spending was increasing at twice the rate of domestic spending.
This has been good both for retailers and landlords. Money spent in International Centres supports national chains and helps take the pressure off more marginal town-centre stores.
McKinsey forecasts that the international shopper market won’t restart until after Q1 2021. But as non-essential retail re-opens, the Association of International Retail (AIR) is planning for the strongest possible return of international sales when those visitors return. We are lobbying the government with the following proposals for a post-Covid-19 recovery:
- Remove the unnecessary 14-day quarantine for overseas visitors to show that Britain is open for business.
- Extend tax-free shopping to visitors from EU member states, who form 70% of international visits but have been excluded because of our membership of the Customs Union. That cost-free regulation change could result in over £1.4bn in additional retail sales each year.
- Remove the Sunday trading restrictions in the West End and Knightsbridge International Centres, which are at a global competitive disadvantage compared with cities such as New York, Dubai and Tokyo, which have no such trading restrictions. New West End Company estimates that this cost-free change would generate over £260m in additional sales annually and support over 2,000 FTE jobs.
- Make visitor visa application easier (or remove the visa requirement) for wealthy visitors. Figures from tax refund agency Global Blue show that the ultra-wealthy 0.9% of Chinese visitors account for around 27% of all Chinese shopping spending.
A possible cooling of diplomatic relations following Covid-19, Hong Kong democracy protests and controversy around Huawei are a threat to the Chinese visitor market, but AIR is working to protect the tourist and international student element of our countries’ relationship.
Beyond China, visitors from the EU, Middle East and fast-growing Far East economies are all hugely important markets for UK retailers.
As we emerge from lockdown, the economy starts to recover and Britain sails out into a brave new post-EU world, property owners, retailers and businesses that rely on international shoppers need to work together to ensure Britain remains one of the best places in the world for high-spending tourists to visit.
Paul Barnes is chief executive of the Association of International Retail