Burberry issues tourist tax warning as minister breaks ranks

Friday, May 19, 2023

Burberry has issued a warning that the United Kingdom’s tourist tax is causing a significant diversion of spending away from its London stores to Paris.

The company’s CEO, Jonathan Akeroyd, expressed disappointment with the government’s decision to end the 20% VAT shopping refund for foreign visitors, stating that it has had a detrimental impact on the company’s finances.

While announcing Burberry’s annual financial results, Akeroyd revealed that the recovery of their London stores, including the flagship on Regent Street, has been much slower compared to outlets on the Continent.

He noted that the increase in tourists returning to London was only 19%, while Paris saw triple-digit growth and Milan experienced a 43% surge. Akeroyd stressed that the elimination of VAT refunds for tourists puts the UK at a competitive disadvantage, hindering Burberry’s ability to celebrate its British luxury brand identity.

Burberry currently operates 13 stores and concession outlets in the capital, and Chief Financial Officer Ian Brimicombe added that even British shoppers are now preferring to spend their money in mainland Europe rather than the United Kingdom.

Minister for London Paul Scully, who is also a candidate for the Conservatives’ mayoral race, broke ranks with the government and openly called for the restoration of the tourist tax perk. He argued that the scheme generates significant income that benefits various Londoners, from taxi drivers to restaurant chefs.

Pressure is mounting on Prime Minister Jeremy Hunt and Chancellor Rishi Sunak from their own MPs to reconsider the VAT decision. The Treasury has cited potential lost tax revenue as a reason for the policy change, but a study by Oxford Economics suggests that scrapping the tourist tax could boost the economy by £4.1 billion in GDP.

Amidst growing calls from business leaders, Downing Street confirmed that Chancellor Sunak is willing to listen and respond to concerns regarding the tourist tax. The situation remains fluid as discussions continue regarding the potential impact and benefits of revising the policy.

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