Tax-free shopping has been put on pause since the UK left the EU in December 2020, resulting in non-EU tourists being obligated to pay a 20 per cent tax on goods purchased in the country.
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According to Glossy, brands have been experiencing fewer sales, with many UK brands, especially luxurious ones, witnessing sales decreases and closing local stores, .
A Westminister debate on travel tax, which is scheduled for September 7, will determine whether the current retail challenges will remain or change as local brands continue to feel the impact of Brexit.
UK luxury brand Mulberry has been operating for over 50 years, but the long time in the UK market doesn’t mean it can remain unaffected by these changes. In January, the brand had to close its main store in London.
“If we are going to be able to get the U.K. economy back to growth, we need a level playing field with Europe. Currently, we simply cannot compete, with Paris, Berlin and Milan all benefitting at our expense,” Mulberry CEO Thierry Andretta said, highlighting the strong competition with the European countries.
According to August 14 data from the retail consortium New West End Company, despite flight bookings to London from the United States being up by 17 per cent compared to pre-pandemic times, the total amount spent by American visitors in the West End in shopping activity had decreased by one per cent.
Meanwhile, travel from the Gulf countries such as Qatar, Saudi Arabia and the United Arab Emirates to London has increased – being seven per cent in the quarter, compared to four years ago, while spending was down by 17 per cent.
Chair of Burberry, Gerry Murphy, had previously told Prime Minister Rishi Sunak that the decision to tax shopping for non-EU tourists had made the UK one of the least attractive destinations. The luxury brand’s CEO, Jonathan Akeroyd, said that Burberry’s tourists returning to London have increased by 19 per cent, but it still remains way behind the rest of Europe.
For example, in Paris, tourist returns were up by three digits while those numbers rose by 43 per cent in Milan.
“We’re disappointed that the government chose to scrap [VAT refunds for tourists]. It puts the U.K. at a competitive disadvantage,” he said.
Burberry has also reported that the lack of tourism spending has impacted UK sales generally, with CFO saying that even British shoppers prefer to spend in Europe rather than the UK.