Sir Paul Smith takes aim at tourist tax as foreign shoppers ditch Mayfair for Milan
Fashion legend Sir Paul Smith has joined the long list of business figures frustrated by the scrapping of VAT-free shopping for international visitors.
The 77-year old designer, who founded his first retail outlet in the East Midlands in 1970, has long attracted overseas visitors from China, Japan and Korea to his flagship store on Mayfair’s Albemarle Street. His world famous designs, known for their distinctive striped or patterned fabrics, have attracted famous celebrities such as Justin Bieber and Lewis Hamilton.
But Smith told the Sunday Times in an interview numbers in the UK had thinned in recent years since Rishi Sunak decided as Chancellor to introduce the so-called tourist tax, making foreign visitors pay 20 per cent VAT on purchases.
“It’s been a shock — a 47 per cent reduction in the amount of non-EU customers coming through our shops equates to quite a few million quid,” he said. “Effectively, we’re 20 per cent more expensive than every EU country.”
Smith, who runs 17 shops in the UK, said he sometimes looked out of his London store’s window to see the street “completely empty.”
Studies suggest wealthy buyers have flocked to European cities such as Paris and Milan instead of London, since the tax break was removed.
A report by the Association of International Retail in February found 63 per cent of international tourists would be more likely to make large purchases in the UK if tax-free shopping was re-introduced.
Research from Oxford Economics suggests that cutting the tourist tax could prompt an additional 1.8 million extra visitors by 2025/26, generating £2.8bn of extra spending, and sustaining 78,000 jobs.
“I see a lot of my customers from all across the world and they say: we’re only here for a couple of days, then we’re off to Paris, or Milan … and that’s where they spend their money now. It’s definitely affected us as a company.
“And not just my London shops either, because I’ve got shops in places like Manchester and Nottingham and the tourists travel all around the country these days.”
Smith’s fashion empire saw full-year sales globally rise by 7.7 per cent to £212.5m in January. However, it posted a pre-tax loss of £2.3m, continuing a loss-making streak since the pandemic.
A UK government spokesperson said: “The independent Office for Budget Responsibility recently published their review of the wider economic effects of removing tax-free shopping for tourists.
“We are considering it alongside industry representations and broader data within the context of the wider public finances. In the meantime, we continue to support our valued British retailers and high streets through billions in tax cuts and reliefs.”