UK must consider reinstating tax-free shopping for tourists, says Harvey Nichols boss

Manju Malhotra warned foreign visitors are spending less time and money in Britain

LONDON, UNITED KINGDOM - APRIL 25, 2014:  The Harvey Nichols department store in the affluent Knightsbridge district of London which is popular with tourists, on April 25, 2014.  (Randi Sokoloff for The National)
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The boss of luxury department store Harvey Nichols has urged the British government to consider reinstating tax-free shopping for tourists to prevent stores “losing another summer”.

Chief Executive Manju Malhotra warned that foreign visitors are spending less time and money in the UK.

She said foreign shoppers are instead “getting into the habit” of buying designer goods in Paris and Milan instead of London.

Her warning came after figures released earlier this year by the tax-free shopping data company Global Blue showed that tourists from the US are now spending more than triple the amount on duty-free goods in France and Spain than they did before the pandemic in 2019.

Last year, tourists visiting Britain from the GCC states spent 35 per cent less than before the Covid pandemic, but spent double in France and 66 per cent more in Italy.

Ms Malhotra told The Telegraph: “I would urge the government to really prioritise it before an election.

“We all benefit from international businesses coming to the UK. The high street, restaurants, museums, they all rely on visitors coming to the UK.

“We don’t want to lose another summer.”

She said tourists were abandoning London for other European capitals.

“Tourists are spending less time and less money in the UK. There is talk of a change being considered as part of a review of tax policy but the timing is not clear.”

Before Brexit in 2020, tourists could receive a VAT refund on items bought in shops on Britain's high streets, at airports and other departure points from the country, which they exported in their personal luggage.

When that VAT relief was removed after Brexit, it essentially made the same goods 20 per cent more expensive.

VAT refunds for tourists were going to be reinstated in Kwasi Kwarteng's ill-fated “mini-budget” last year, but were subsequently dropped by his successor as chancellor, Jeremy Hunt.

Earlier this year, Gerry Murphy, chairman of the luxury clothing maker Burberry, accused Prime Minister Rishi Sunak of a “spectacular own goal” over the issue.

Mr Murphy said the decision to scrap the VAT refund for tourists had made the UK the “least attractive” shopping destination in Europe.

The British government has said it is not interested in reintroducing the VAT refund scheme, which would cost the public coffers somewhere in the region of £1.4 billion.

Ms Malhotra said the government should consider alternatives, including offering tourists vouchers instead.

She said any scheme to replace the system must be practical.

Customers can opt to ship their items home to claim back the VAT, but she said that does not work.

“They don’t want to do that, they want to wear their new dress or their new bag now,” Ms Malhortra told The Telegraph.

“Any tax-free equivalent must ultimately be simple and easy to use. Because if it isn’t, well then customers just won’t use it.”

MPs are due to debate the issue in September.

Harvey Nichols has eight stores in the UK and Ireland, as well as branches in Riyadh, Dubai, Hong Kong and Kuwait.

Updated: July 22, 2023, 1:18 PM