London Worries Its Losing Luxury Shopping Tourists To Milan And Paris

Luxury retailers in London fear the city is losing its appeal as a shopping destination as tourists from the US, China and the Gulf flock to Paris and Milan, where tax breaks continue to keep shopping costs low.

As Chancellor Jeremy Hunt delivers the government's budget statement on Wednesday, the industry wants him to restore duty-free shopping for overseas visitors, which ended in 2020 when Britain left the European Union.

Big names like department store Harrods, Harvey Nichols, manager Cadogan Chelsea and the Lansborough Hotel have joined hundreds of retailers to urge Hunt to change the rules.

"We've heard from some brands that they prefer to invest in stores in Paris," Steve Midway, chief executive of Knightsbridge and Kings Road Partnership, told Reuters in an interview at Harrods ahead of opening day.

"They are looking for sales."

Medway pointed out that international visitors contribute £28.4 billion ($34.5 billion) to UK GDP each year, of which Knightsbridge and the Kings Road are an important part.

Figures from international tax refund firm Global Blue show that spending by American visitors to the UK has returned to pre-pandemic levels in 2019, with spending rising in France, Spain and Italy.

The problem is compounded by the fact that British shoppers themselves are starting to spend more in the European Union, where they can reclaim the Value Added Tax (VAT) levied on goods.

Amid signs some luxury brands are investing more in their French boutiques on the Champs-Élysées than their London branches, industry leaders say tax breaks need to be restored to keep Britain competitive.

They argue that a prolonged lack of it will affect the entire tourism ecosystem, including hotels, restaurants, taxis, museums and theaters.

The government says tourists in the UK can still shop tax-free if they send goods direct to an address abroad and it has phased out tax-free shopping to boost revenue and after an assessment showed it wasn't great would affect. tourism

own goal

Burberry, Britain's largest luxury retailer, warned last year that VAT rules would leave London behind other European cities. Bag maker Mulberry has cited the end of VAT-free shopping as the main reason it closed its Bond Street store last month.

Britain has a big, special purpose, said Sarah Iaconelli, communications director at the New West End firm, which represents 600 companies: "You can go to Europe and get a 20% discount, why not?"

Global blue data network. It shows that US visitor spending in the UK in 2022 will return to 101% of 2019 levels, but France and Italy will more than double that level at 256% and 226% respectively.

For visitors from the Gulf States – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates – UK sales are back to just 65% of 2019 levels. France, on the other hand, is 198% below 2019 levels. Italy is 166% and Spain is 166% is 158%.

Of even greater concern for the future, a survey by Global Blue of 10,000 Chinese who moved to Europe in 2019 found the UK is also declining in attractiveness.

Although it was the second most popular travel destination after France among major European countries in 2019, the survey found that only 42% planned to visit the UK, compared to 70% in 2019, with Spain, Italy and Germany The most beloved.

"The Chinese will be the most important demographic to watch because they've always been the most budget-conscious," said Midway, whose partnership represents hundreds of companies in luxury shopping districts.

"That's why the tax cut was so important to them, and now we're the only country in Europe that doesn't offer it."

Harrods chief executive Michael Ward said if no action were taken, the impact would be felt beyond the business, as London hotels and restaurants are already noticing a dearth of foreign buyers.

Cadogan, a large landowner in the Chelsea and Knightsbridge area of west London whose property covers more than 90 acres, also urged the government to take action.

"While our focus is on driving international travel, we are currently at a clear and needless disadvantage compared to our neighboring EU cities," said CEO Hugh Seaborne.

Hang Heng, 22, who lives in China, and his boyfriend went shopping on New Bund Street on Tuesday morning. They say he didn't think about VAT before because he usually spent his parents' money.

"Maybe I'll save a lot of money to go to France?" She said.

($1 = 0.8228 pounds )

(Reporting by James Davey and Sarah Young; Additional reporting by Ben McCurry; Editing by Kate Holton and Catherine Evans)

This article was written by Reuters' Sarah Young and James Davey and is legally licensed by content marketplace Industry Dive. Please direct any licensing questions to [email protected] .