LONDON (Reuters) – London is slipping behind Paris and Milan as a tourist destination for high-net-worth buyers due to a lack of tax incentives.
British luxury brand Burberry made the announcement after sales of the collection declined in the UK.
From the end of 2020, post-Brexit, foreign tourists in London will not be able to claim VAT refunds on purchases, putting stores in the British capital at a disadvantage compared to competing European cities.
Amid the political turmoil that has rocked Britain this year, the short-lived government of Prime Minister Liz Truss said it would introduce a new VAT-free shopping scheme for international visitors to stimulate the retail, leisure and hospitality sectors.
Weeks later, the new government led by Prime Minister Rishi Sunak scrapped the idea in a bid to save resources.
Burberry’s chief financial officer, Julie Brown, said London was declining as shoppers from the US, the Middle East and Asia flocked to the shopping districts of Paris and Milan, rather than Bond Street and Knightsbridge in the British capital.
“There is not the same level of tourism in the UK as there used to be as we see more and more tourists going to Paris and Milan,” Brown told reporters today.
“It’s been a real incentive for luxury buyers, a real incentive to come to the UK,” Brown said of the tax refund.
Tourists in European cities can claim sales tax refunds on certain high-value purchases from certain retailers.
Today’s Burberry results showed that continental Europe, particularly France and Spain, outperformed the rest of Europe, the Middle East, India and Africa in terms of sales growth, while UK sales were in line with the average.
France’s LVMH, which owns Louis Vuitton and Dior, and Kering have outpaced Burberry’s sales growth in recent times.
“If there is an alternative tax-free shopping system available in the UK, I think tourists will definitely come back,” said Brown.
(Translated by Chiara Bonaccio, Editing by Francesca Pescioneri)
