London faces consumer growth slowdown, warn West End retailers

Footfall in the West End of London remains about a fifth lower than before the pandemic, according to research by the New West End Company, which represents more than 600 businesses in the area.

The group warned that domestic spending in the capital’s main shopping areas will be further squeezed as a result of the economic slowdown, leaving retailers more reliant on overseas travellers who will benefit from a cut in VAT for their shopping outlined in last month’s mini-budget.

NWEC, whose members include retail, restaurant, hotel and property owners across Bond Street, Oxford Street, Regent Street and Mayfair, said monthly sales since May had been in line with or above pre-pandemic levels for most trading areas.

But it added that overall forecasts for the remainder of 2022 had been revised down since its last survey in January because of a weaker economic outlook. The report, which was compiled by consultancy Colliers, also said there would be reduced consumer expenditure in 2023 compared with previous forecasts.

The research, which will be published on Monday, said that total sales across the West End’s shops, bars and hotels had reached about £4bn so far this year, more than double the same trading period in 2021, when the UK was still emerging from pandemic lockdowns.

But it found that sales were outpacing the rate of recovery in West End footfall, suggesting a smaller number of people are spending more.

Domestic footfall growth has climbed during 2022 to between 20 and 30 per cent below 2019 levels in the first half of the year.

NWEC said that further help was needed from the government to help boost the number of visitors given the challenging domestic consumer climate and cost of living crisis, including reforms to business rates and a relaxation of Sunday trading laws in the West End and Knightsbridge.

International footfall has increased significantly in recent months as overseas travel has picked up, but rates also remain about 20 to 30 per cent lower than pre-pandemic levels.

NWEC expects international visitor numbers to recover in 2023 — a target now helped by the unexpected decision by the chancellor Kwasi Kwarteng last month to reintroduce VAT refunds for tourists visiting the UK.

London businesses, including NWEC, had been lobbying to overturn the 2021 decision to stop overseas visitors to the UK from being able to reclaim sales tax on shopping.

The change will bring an extra £2bn in spend to district business annually, according to NWEC, although Treasury documents estimate the cost of this decision would be £5.2bn over three years.

Dee Corsi, interim chief executive of NWEC, said “the reintroduction of tax-free shopping is a huge win for the West End, levelling the playing field between us and other retail destinations, such as Paris and Milan”.