Burberry in new warning on tourist tax as minister breaks ranks

London stores — including Burberry’s Regent Street flagship — are recovering much more slowly than outlets on the Continent, chief executive Jonathan Akeroyd said  (PA)
London stores — including Burberry’s Regent Street flagship — are recovering much more slowly than outlets on the Continent, chief executive Jonathan Akeroyd said (PA)

The boss of Burberry on Thursday warned that the tourist tax is diverting vital spending away from its London stores to Paris as a government minister broke ranks to urge Jeremy Hunt to scrap it.

Burberry’s chief executive Jonathan Akeroyd said the Government’s “disappointing” decision to end the 20 per cent VAT shopping refund for foreign visitors was costing the company dear.

Announcing annual financial results for Britain’s biggest luxury fashion brand, he said London stores — including the Regent Street flagship — were recovering from the pandemic much more slowly than outlets on the Continent.

“Our tourists returning in London were up 19 per cent, but that does compare poorly to the rest of Europe. Our increase in Paris was in triple-digits, so London is still some way behind. In Milan it was 43 per cent,” he said. “We’re disappointed that the Government chose to scrap it [VAT refunds for tourists]. It puts the UK at a competitive disadvantage.

“We’re fortunate that we’re a global business and we can manage that but we want to be celebrating the fact that we’re a British luxury brand. And when tourists come into the UK they will be coming to Burberry as one of the first shops they would go to and as a distinctively British luxury brand.”

Burberry has 13 stores and concession outlets in the capital. Chief financial officer Ian Brimicombe added that even British shoppers were now preferring to do their spending on mainland Europe rather than in the UK.

At last month’s Business Connects conference, Burberry chairman Gerry Murphy accused Rishi Sunak of a “spectacular own goal” when, as chancellor, he ordered VAT free shopping for tourists to be axed at the start of 2021. Mr Murphy said this made Britain the “least attractive” shopping destination in Europe.

Meanwhile minister for London Paul Scully, who on Thursday announced he was entering the race to become the Conservatives’ mayoral candidate, became the first member of the Government to openly call for the tourist tax perk to be restored.

He told LBC: “There are a few political areas where I struggle to hold the line. This is one.” He said the scheme was misconstrued by some as being about “luxury brands” when it was a way to generate millions in income that would “work its way through the system” to benefit many Londoners, from taxi drivers to restaurant chefs.

Mr Scully revealed he had asked the Treasury to carry out “dynamic modelling” research to better illustrate the benefits of the scheme.

The PM and Chancellor Jeremy Hunt are coming under increasing pressure from their own MPs to rethink the decision on VAT. One senior Tory source said: “He (the Chancellor) could be persuaded to do it [reverse the policy] if it could be shown to be tax neutral or better.” The Treasury has argued that keeping VAT free shopping after Brexit when it would have been extended to EU shoppers, would have cost £2 billion a year in lost tax revenue by 2026.

However, a study by forecaster Oxford Economics concluded that extra spending generated by scrapping the tourist tax could give the economy a £4.1 billion GDP boost.

Downing Street said this week that Mr Sunak was ready to listen calls from business chiefs to axe the tax. The PM’s official spokesman said: “We are always happy to listen to the sector about their concerns and obviously we will respond accordingly.”