Heathrow Airport’s chief executive John Holland-Kaye has urged Rishi Sunak’s government to lift its “ridiculous” ban on duty-free shopping, warning it is hindering aviation sector growth.
During a panel discussion at the Airlines 2022 conference in London on Monday, the boss of the country’s largest airport said the UK had “shot itself in the foot” by scrapping the VAT-free shopping scheme for overseas visitors.
He said the UK had “many big advantages” over other nations in terms of geographical location, size of the economy and language in terms of transatlantic trade.
The UK has a “fantastic, vibrant supply chain” and world-leading airlines and airports and is in a prime position to be a global leader in aviation, Mr Holland-Kaye said.
“We've got the entire value chain for aviation right here in the UK, including great companies like Airbus, Rolls-Royce, the energy companies,” he said. “That's pretty unusual; there’s only three or four countries in the world that have all of that.
“So that means that we should be a leader in aviation.
“But we also have some disadvantages. We are outside the EU, which means we don't have access to that huge virtual domestic market. So that's something that we need to plot all the way through.”
However, he said Britain was also at a disadvantage to its European competitors because it was the only country on the continent to not offer duty-free shopping to overseas travellers.
“We have some things that we're very good at in terms of making us a competitive place, easy place for people to come to, but some disadvantages,” he said.
“So for tourism, we’ve got fantastic tourist assets and yet we shoot ourselves in the foot by banning duty-free shopping, which is a completely ridiculous situation to have in a country that thrives on tourism.”
Speaking to The National, Mr Holland-Kaye said a reinstatement of duty-free shopping would offer the UK a "massive opportunity" for growth.
"We are losing market share to the EU at a time when we need it most," he added.
In 2020, while serving as chancellor in Boris Johnson’s administration, Mr Sunak abolished VAT-free shopping for international visitors, claiming it was a “cost relief” than mainly benefited London.
It had allowed overseas visitors to claim back 20 per cent on their purchases in the UK.
After Kwasi Kwarteng was appointed chancellor in September, he tried to reinstate duty-free shopping. Liz Truss’s government ushered in the scheme “with the aim of providing a boost to the high street and creating jobs in the retail and tourism sectors”.
But the move was reversed by Jeremy Hunt after he replaced Mr Kwarteng.
Major players, including the Association of International Retail and luxury trade association Walpole, had led a campaign calling for VAT refunds for tourists in the UK and airport tax-free shopping.