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Bosses at Burberry have urged Rachel Reeves to reinstate a tax-free shopping scheme for tourists in the budget to “unlock further growth” and increase tourist spending.
Executives at the British luxury brand called on the chancellor to pursue “progressive policies” to boost shopping sprees from tourists, pointing specifically to a value-added tax (VAT) refund programme for foreigners that was scrapped five years ago.
Tax-free shopping was abolished at the end of 2020. The policy made a brief return under Liz Truss’s short-lived government in 2022 but was scrapped again weeks later by her successor as prime minister, Rishi Sunak.
Burberry said the UK had been losing out ever since, with shoppers from the US, Middle East and Asia apparently flocking to Paris and Milan rather than London for luxury goods.
Bosses argued Reeves had an opportunity to lure overseas shoppers back to the UK in her autumn budget on 26 November. “We would like to see progressive policies that reinvigorate international visitor spending, that support jobs and stimulate growth across the whole visitor economy,” Burberry’s chief executive, Joshua Schulman, said in a media call on Thursday.
He said that would involve “changing the VAT refund scheme, putting us on par with other European countries. We know that our tourist business here in London has gone down ever since that refund was taken away.”
Burberry said UK sales accounted for less than 10% of the brand’s overall revenues, but that could increase if the Labour government reinstated the VAT change. “Obviously at the moment [UK sales are] just 10% but it could clearly grow to be a lot more than that if we had more tourism here,” the chief financial officer, Kate Ferry, told reporters.
The brand cheered signs that its turnaround plan was bearing fruit, with comparable store sales rising for the first time in two years – up 2% in the second quarter – and losses nearly halving in the six months to the end of September.
Schulman said Burberry had “begun to see customers return to the brand they love, resulting in comparable store sales growth for the first time in two years. While it is still early days and there is more to do, we now have proof points that Burberry Forward is the right strategic path to restore brand relevance and value creation.”
Burberry revealed its restructuring plans in May, saying it could end up cutting about 1,700 jobs worldwide by 2027 – including the entire night shift at its raincoat factory in West Yorkshire – to help cut costs and restore profits.
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Adjusted operating profit for the six months to the end of September was £19m, swinging from a £41m loss during the same period last year. However, Burberry took a £37m restructuring charge, partly linked to redundancy payouts related to an undisclosed number of job cuts, resulting in a £48m loss. That marked an improvement on the £80m loss reported last year.
“We had a large transformation programme over the summer, [and] yes, we are facing some reasonably large, exceptional items relating to those this year,” Ferry said. “But as we move into next year, I can certainly see a world where we’re delivering strong profit and good free cashflow.”
