Published: 21:51 BST, 18 October 2020 | Updated: 22:23 BST, 18 October 2020
Top luxury brands including Ted Baker and Fortnum & Mason have warned the Chancellor that axing duty-free sales during the Covid-19 pandemic will put thousands of retail jobs further at risk.
In an open letter to Rishi Sunak, 16 firms said removing VAT refunds for international visitors to shops would deliver a hammer blow to the fashion industry ‘at a time when it can ill afford it’.
Their warning comes after research laid bare the devastation retailers face this year, with a record 11,120 chain stores closing in the first six months.
Warning: Ted Baker and Fortnum & Mason are among 16 firms to lobby Chancellor Rishi Sunak
Under the changes on January 1, visitors from outside the EU will no longer be able to claim VAT refunds for goods such as perfume, clothing and electronics bought at shops. UK holidaymakers travelling outside the bloc will also lose tax relief.
The Treasury claims the shakeup will save the public purse £1billion. But it faces a chorus of opposition from businesses, including Boots, Dixons Carphone, Heathrow Airport, Marks & Spencer and 600 West End firms, who say it will further hurt sales at a time of pandemic. In their letter, bosses of the luxury brands, which also include Chrissie Rucker’s White Company, Paul Smith, Charles Tyrwhitt and Superdry, urged the Chancellor to reverse course.
They said: ‘This will be a hammer blow for the British fashion industry. Tourists spend billions of pounds in towns and cities across the country, sustaining our vibrant fashion and tourism industries, and helping our arts and culture sectors to thrive.
‘Removing an incentive for international shoppers to come here will affect jobs and livelihoods.’ Duty-free shopping has already been hit this year by international travel restrictions.
Luxury brands have also warned that travellers are ‘extremely price sensitive’ and that ending VAT refunds will only ‘encourage them to spend their money in Paris, Milan or Madrid’.
They fear the UK will become the only country in the developed world not to offer tax-free shopping to travellers – putting it at a major disadvantage.
Sales of luxury products can account for as much as 75 per cent of total sales in airports. However, the Treasury said its decision was taken ‘following concerns that the tax-concession is not always passed on to consumers in airports’, while the in-shop VAT refund scheme was ‘costly’.
Yesterday a spokesman added: ‘We’re investing billions to support business across the country through our plan for jobs. Less than 10 per cent of non-EU visitors to the UK use the VAT refund shopping scheme and extending this to EU visitors could cost up to £1.4billion a year.
‘Overseas visitors can still buy items VAT free in-store and have them sent directly to their overseas addresses.’