Following the news that the UK government is considering reinstating tax-free shopping for tourists:

Pippa Stephens, Senior Apparel Analyst at GlobalData, a leading data and analytics company, offers her view:

“If the government were to reinstate tax-free shopping for tourists visiting the UK, it would be a welcome relief to brands and retailers across the apparel sector, especially luxury players. The move would help London win back tourists from the likes of Paris, Milan, and Madrid, boosting both the overall economy and luxury apparel sales.

“Since the termination of tax-free shopping at the end of 2020, aspirational shoppers, who tend to buy entry-priced luxury items using their savings, have cut back on purchases when visiting the UK due to prices now being 20% higher than in nearby countries. This has caused the UK to be particularly impacted by the slowdown of the luxury market as consumers also grapple with inflationary challenges, with Burberry highlighting how its performance in the UK lagged Continental Europe in the 26 weeks ending 30 September 2023.

“In response to this, over 400 businesses signed a letter to the Chancellor of the Exchequer in September 2023 asking for the policy to be restored, driving the Office for Budget Responsibility (OBR) to carry out a review, with the results due to be published alongside the budget next month. This reinstatement would enable the UK’s luxury market to return to its perpetual outperformance again once inflation subsides, with the fortune of domestic players like Burberry and Mulberry particularly reliant on tourist sales, as luxury shoppers prefer buying designer goods in the brands’ home markets.”