British Tourism Spending Hit by Strong Pound and Rising Costs

Tourist expenditure across Britain is predicted to remain suppressed over the next five years, driven by persistent inflation, a robust pound sterling and the cessation of VAT-free shopping, according to fresh research released today.

The Centre for Economics and Business Research’s latest analysis reveals that real spending per overseas visitor is projected to expand at merely half the rate of UK economic growth through to 2030. This muted growth trajectory stems from Britain’s comparatively higher inflation rate since 2019 versus other major tourist destinations including China, the United States and the European Union, with UK prices surging 26.6 per cent during this period.

Sterling’s strength has amplified the cost burden for international visitors. The British pound has gained 7.5 per cent against the US dollar since January, though it has declined more than 3 per cent against the euro. The broader trend shows sterling appreciation versus the euro compared to 2019 levels.

Government policy changes have further complicated matters. The elimination of VAT refunds for non-EU visitors in January 2021 has redirected tourist flows toward European shopping capitals like Paris and Milan, where tax-free shopping remains available. The introduction of a £16 Electronic Travel Authorisation requirement for most visitors, including EU nationals, has added additional friction.

VisitBritain forecasts 43.4 million tourist arrivals in 2025, marking a 6.2 per cent increase from pre-pandemic figures. These visitors are expected to spend £33.7 billion, up from £31 billion in 2024. While the government targets 50 million international visitors by 2030, current spending patterns suggest this would yield only a 6.5 per cent rise in real-terms expenditure compared to pre-pandemic levels.

The CEBR emphasises that visitor numbers alone cannot drive growth, stating that revitalising per-visitor spending is crucial for maximising tourism’s economic impact. The government has announced plans to launch a National Visitor Economy Strategy this autumn to support its ambitious visitor targets.