In a move that highlighted the challenges faced by high-end handbag retailer Mulberry, the closure of its prestigious New Bond Street store in February was attributed to a decline in trade from international visitors and skyrocketing expenses, rendering it economically unsustainable, said CEO Thierry Andretta.
Prior to the elimination of VAT-free shopping, around 50% of the store’s sales came from foreign tourists, a figure that has since dwindled to a mere 5%.
Adding to the conversation, Michael Ward, the managing director of Harrods, revealed that the tourist tax compelled the company to substitute luxury handbags with more affordable products in its airport shops.
According to Mr. Ward, their previous ability to sell high-priced handbags worth £1,000 or £1,500 at airports, where customers could reclaim £200 or £300 in tax, has been curtailed.
This discount, previously granting tourists the opportunity to recover VAT on select purchases like upscale clothing, was abolished in 2021 following the Brexit aftermath.
The government argued that it no longer enticed tourists significantly and failed to benefit regions beyond Central London.
While Liz Truss initially planned to reinstate VAT-free shopping during her tenure as Prime Minister, this idea was swiftly abandoned when Jeremy Hunt assumed the role of Chancellor subsequent to the mini-budget in September.
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