Burberry blasts decision to end of duty free shopping for tourists

Fashion giant Burberry has told the Government that the decision to scrap duty-free shopping for tourists could cost the company hundreds of millions of pounds.

Chancellor of the Exchequer Rishi Sunak ended VAT refunds for international visitors to UK shops on January 1, in a move that caused outrage among retailers.

Posting a 9 per cent fall in store sales in the 13 weeks to Boxing Day, Burberry warned business would be further hit once travelling resumes, as customers will choose Paris and Milan instead of coming to London.

Duty free cut: Burberry warned business struggling in the pandemic would be further hit once travelling resumes, as customers will choose Paris and Milan instead of coming to London

The company, which last year joined forces with footballer Marcus Rashford for a series of initiatives to help disadvantaged youngsters, added that the Government must come to its senses and U-turn on the policy.

Julie Brown, chief financial officer, said: ‘We remain disappointed with the decision to end the VAT retail export scheme, and we are urging the Government to reconsider this.

‘The removal of the scheme will have a limited impact on trading this year, because we’ve got very low levels of tourist traffic due to Covid.

‘But we do expect this to have a more significant impact on the attractiveness of the UK when travel resumes.’

Half of Burberry’s UK sales are to tourists from China, India and the US, with most reclaiming VAT on their purchases and taking them home in their luggage.

Analysts said that Burberry cannot afford to lose the business, adding that many of these tourists were spending tens of thousands of pounds on their shopping trips.

Its clothes are high-end, with prices for the iconic trench coats starting at £1,000.

In a normal year Burberry revenue from tourists spending in the UK is around £320million.

Flavio Cereda, retail analyst at Jefferies, said: ‘We’re not talking about the 22-year-old girl here who buys herself a £400 bag, although that is a big help. 

‘We are talking super-high net worth individuals who think nothing of spending £20,000.’ He added: ‘London is at a major disadvantage now as a luxury retail hub.’

Helping to keep Covid in check 

Striking: Burberry’s collaboration with footballer Marcus Rashford helped to win over younger customers 

Burberry may be a high-end fashion house but it has played a part in helping fight the pandemic.

In March last year Burberry donated a lump sum to the University of Oxford for the development of a vaccine.

And it retooled its trench coat factory in Castleford, West Yorkshire, to make non-surgical gowns for medical and care workers.

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By the end of May, Burberry had donated more than 150,000 pieces of PPE to the NHS.

The company said: ‘We continued to support the Covid-19 relief effort, manufacturing PPE at cost for the NHS and we were particularly pleased to see the start of the roll-out of the vaccine.’

With footballer Marcus Rashford, who models for the brand, it also made donations to charities Fare Share, The Trussell Trust and The Felix Project, all of which are tackling food poverty across the UK.  

Other high-end retailers will also be hit hard as shoppers on holiday in the UK often spend a week or two in the capital visiting top fashion houses and department stores such as Harrods, Selfridges and Harvey Nichols.

In December, brands such as Chanel, Longchamp, Paul Smith and Fortnum & Mason signed a letter warning the Chancellor that ending tax-free shopping for tourists will cost 40,000 British jobs and £1billion of investment.

Burberry was also frustrated by a poor set of results, with sales down 9 per cent in the three months to December 26, the crucial Christmas trading period.

Within this, the fashion house posted a 37 per cent drop in sales across Europe, the Middle East and Africa as the pandemic hit tourism and forced about one in five of its shops to close.

There were bright spots, including Asia-Pacific where sales climbed by 11 per cent.

And the company’s collaboration with Rashford helped win over younger customers.

Nevertheless, speculation was rife that the company could now become the latest UK takeover target, following a spate of merger and acquisition activity in recent months.

Analysts said the company looked cheap, as the shares have fallen 20 per cent over the past year.

Burberry has no controlling shareholders, a rare thing in the luxury world, which would make it appealing to a cash-rich rival like Kering.