Luxury fashion brand Burberry has challenged incoming UK prime minister Andy Burnham to boost London as a shopping destination by restoring tax-free shopping for tourists.
A value-added tax change has cost the UK capital dearly as a European shopping destination.
Joshua Schulman, Burberry's chief executive, said Mr Burnham should reinstate tax-free shopping for tourists, which was abolished at the start of 2021.
Burberry's tourist business in London has declined by 50 per cent since 2019, largely as a result of the VAT refund scheme being abolished, Mr Schulman said, and spending has shifted to Paris where its tourist business is up 30 per cent.
“While we know the new PM [prime minister] has a busy agenda, we would hope that restoring London as the most important shopping capital this side of the Atlantic would be at the top of his list,” said Mr Schulman.
Leading financier Mohammed Alardhi, executive chairman of Investcorp, said businesses like his saw opportunities in British investments but craved stability from the government's decisions.
“Investors don't need slogans and summits. They really want predictability,” he told The National's The Inside Brief. “They just want to make sure they can price and they can work with different tax, different regulation – but just make them predictable. They want a policy on energy that they can plan on.”
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Mr Burnham's key theme is empowerment of the disadvantaged to play an active role in the economy, something he championed in nine years as mayor of Manchester.
“I will be a pro-business leader of the Labour Party as I was a pro-business mayor of Greater Manchester,” he said on Friday. “We turned places round together and that is the way we run in Manchester and we will take to the whole country.”
Other tax advice has come from the International Monetary Fund, which warned Mr Burnham that raising the top rate of income tax would hurt the economy. The move would be discouraging, whereas higher rates on the lower-paid would be a more sustainable change.
The UK is close to the top limits on tax policy, with levies on VAT and property already above international averages and wealth taxes difficult to capture, the IMF said this week.
UK taxes on labour are slightly lower overall than Group of Seven peers and account for almost half of all government revenue, making them an “obvious candidate”. Targeting the rich would backfire, the IMF said, as they are already heavily burdened and have little capacity to pay more.
“Targeted increases in marginal tax rates towards the bottom of the earnings distribution, accompanied by more generous in-work transfers, would be more efficient,” the IMF said, while recommending “reducing very high marginal effective tax rates at the top”.
For a quick fix, ensuring that Britain was no longer the “least attractive” shopping destination in Europe would be an obvious place to start in the quest for a more dynamic economy.
