London is losing ground in the global competition for luxury goods and high-spending shoppers, falling behind cities like Paris and Milan, according to Michael Ward, the Managing Director of Harrods. In an interview with The Telegraph, Ward attributed this decline to the end of VAT-free shopping for tourists almost two years ago. Previously, non-EU tourists could claim back VAT at the airport, which was a significant incentive for shoppers to visit the UK. However, the UK government abolished this perk in 2021, disappointing retailers who had hoped it would be extended to European shoppers after Brexit. The restoration of VAT-free shopping was briefly announced in a mini-budget last year, but it was later re-abolished by the new Chancellor and Prime Minister.
Ward emphasized the importance of British luxury stores offering exclusive products, especially in the absence of VAT-free shopping. With Chinese shoppers now having more travel options, Ward questioned why a customer would choose to buy a Christian Dior saddlebag in London for £2,000 when they could purchase the same item in Paris. He urged the government to make more efforts to attract tourists to London, pointing to the comprehensive tourism strategies implemented across Europe. According to Ward, Britain should leverage its strength in “soft culture” to differentiate itself from other European destinations.
Despite the government’s launch of a tourism recovery plan with the goal of restoring pre-pandemic visitor numbers by 2023, the actual numbers remain significantly lower, with decreased spending as well. Ward criticized the government’s revenue expectations from abolishing VAT-free shopping, stating that research reports have suggested the figures are incorrect. Bringing back VAT-free shopping not only has the potential to boost direct spending by billions but also to generate additional billions in other tourist spending.
As a solution, Ward has called for an independent review of the government’s decision to abolish VAT-free shopping, similar to the reviews conducted for other budget aspects. It is clear that London needs to take proactive measures to reclaim its position as a top destination for luxury shopping and high-spending tourists.
Here are two useful links with further information on the topic:
1. The Telegraph: This article provides more details and insights from the interview with Michael Ward and delves into the impact of the end of VAT-free shopping on London’s luxury retail sector.
2. Government UK: This webpage outlines the UK government’s tourism recovery plan and the strategies being implemented to revive the tourism industry after the pandemic.
