Reinstating tax-free shopping for tourists visiting the UK would be a welcome relief for the luxury sector, which is suffering from softer consumer demand, according to GlobalData.
The move would benefit retailers across the apparel sector, especially luxury players who have lost tourist sales to other attractive markets such as Paris, Milan and Madrid.
The termination of tax-free shopping has caused the UK to be particularly impacted by a slowdown in the luxury market, with retailers like Burberry underperforming in the country when compared with the rest of Europe.
As retailers await the government’s decision on the policy in next month’s Budget, GlobalData says a reinstatement “would enable the UK’s luxury market to return to its perpetual outperformance again once inflation subsides”.
Pippa Stephens, senior apparel analyst at Global Data Retail, said: ”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 September 30, 2023.”
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