Rachel Reeves issued warning over 'tourist tax' as economy suffers £11.1bn blow

has been issued a warning over a hated " tax" as the economy suffers an £11.1billion blow.

has been urged to re-introduce VAT-free shopping for overseas visitors, with more than 300 companies concerned it is putting the UK at a "massive global disadvantage".

The companies' chief executives have written to demanding she take "decisive action" and announce the move in next week's Budget.

Those who signed the letter include hoteliers, fashion designers and bosses at John Lewis, the Royal Opera House, British Airways and Fortnum & Mason.

They wrote: "What has become known as the 'tourist tax' has turned into a spectacular own goal for the UK.

"It means the UK is now the only country in Europe that does not offer tax-free shopping to tourists, leaving British businesses at a massive global disadvantage.

"This does not just affect a few luxury stores in London's West End, as some have claimed. People are increasingly choosing to shop in Paris, Milan and Berlin rather than here because the VAT rebate has gone.

"The entire tourist economy is affected. Keeping the tourist tax in place means that all of our businesses are operating with one hand tied behind their backs."

VAT-free shopping for tourists was scrapped by Rishi Sunak when he was chancellor. following Brexit. At the time, the Treasury said reinstating the scheme would cost up to £2 billion a year in taxes.

But retail bosses have said this is based on "wrong" assumptions such as the belief that getting rid of tax-free shopping would have little impact on where people choose to go on holiday.

Brian Duffy, the chief executive of the Watches of Switzerland Group, who also co-signed the letter, said: "The new Labour Government says that growth is its priority.

"Bringing the UK in line with other counties and removing the tourist tax would make an immediate positive impact on UK economic growth. We are calling for a fresh, objective Government assessment of this important subject as a matter of urgency."

Meanwhile research from the Centre for Economics and Business Research (Cebr) has claimed that abolishing the tax break has resulted in the UK economy losing out on £11.1bn every single year, with millions of people deterred from visiting Britain as a result.