Harvey Nichols boss Joseph Wan’s worst fears have been realised after sales growth at the luxury retailer stalled following tax changes that affected its wealthiest foreign customers.

The department store group chief executive told Retail Week that sales growth slowed dramatically at its Knightsbridge flagship following the non-domicile tax change in April. Sales at its regional stores have fallen by as much as 6 per cent year on year. Other luxury retailers have also voiced concern over the changes.

Wan said: “I can’t believe this tax change – it is preventing or reducing the ability to invest in this country.”

The best-performing of Harvey Nichols’ regional stores posted flat year-on-year sales in April, while the remaining four reported falls of between 4 and 6 per cent.

Wan said the retailer’s flagship Knightsbridge store produced “modest growth” of 2 per cent during the month, whereas it had been previously enjoying growth of between 6 and 7 per cent.

He conceded the tax changes may not be the only factor affecting sales, but they have had a strong impact. He said: “If non-domiciles want to invest in this country – whether for a second home, investment or consumption – for every £1 or £1 million, they will be taxed 40 per cent.”

Harrods chief executive Michael Ward echoed Wan’s concerns, but said Harrods had not yet seen any adverse effect on sales. “We will continue to monitor it closely,” he said. “We will have a better view of it when we have gone through the whole summer, when most visitors come to the UK.”

Luxury jewellery retailer Theo Fennell chief executive Pamela Harper said: “If individuals relocate to Geneva rather than to London and take their money with them, it is of concern to the luxury retail sector. I would like to see a reverse.”

As he warned in Retail Week (February 29), Wan said that the luxury retailer is now “more open-minded” when approached by mass-market brands that want to be included in the Harvey Nichols brand portfolio. This would see the retailer expand its high-end designer positioning to appeal to the more aspirational customer.

The tax changes force non-domiciles to pay a £30,000 levy to preserve their privilege to not disclose their income and assets.

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