Britain is 'falling back' and lacks a competitive edge because of the controversial tourist tax, business leaders warn

Tourism bosses have warned MPs that Britain is losing its competitive edge because it lacks a VAT-free shopping scheme.

MPs questioned chief executives on the impact of Rishi Sunak's decision to remove the 'tourist tax' refund policy for holidaymakers in 2021.

Marks & Spencer, Harrods and Mulberry are among more than 400 prominent businesses that have backed the Mail's campaign calling for the Government to scrap the levy.

Foreign visitors are opting to spend more time and money in rival destinations, such as France and Italy, tourism bosses told the culture, media and sport committee.

Paul Barnes, of the Association of International Retail, which represents Bicester Village and Heathrow Airport, said Britain is 'falling back' as a top tourist destination.

He said Britain is facing a 'spiral of decline' and that retailers are investing more in Paris, where there is tax-free shopping, rather than London.

Patricia Yates, chief executive of VisitBritain, said: 'This isn't just about retail shops on Bond Street, this is about supply chains across the UK. It is seen as a tax break for wealthy people, it's not.

'We want people to buy British brands while they are in Britain.'

Retail destination Bicester Village is seeing 'a significant deflection of spend' to Europe, according to Hayley Beer-Gamage, chief executive at tourism board Experience Oxfordshire.

She said: 'Destinations offering tax-free schemes are being very aggressive with it. We are seeing European destinations advertising on the London Underground and regional airports.'

Business chiefs are holding their breath for a sign in Chancellor Jeremy Hunt's Autumn Statement next week that he has listened to them.