Neil Clifford, the boss of Kurt Geiger, does not hold back in voicing his opinion regarding the UK’s decision to axe tax-free shopping for international visitors. He thinks that it was a big mistake, with basically the UK “shooting itself in the foot.” Now let’s get into the detail with respect to why such a thing, according to Clifford, is such a big problem and what it means both for shoppers and businesses in the UK.

The Big Tax-Free Shopping Shift
Until 2021, the special perk international visitors had over any UK citizen was that they were allowed to get a VAT refund on their purchases-Value Added Tax. It meant that by buying something while visiting the UK, you could claim back 20% of the price. But that scheme was scrapped, and now Clifford says it’s causing serious trouble for Britain.

In the words of Clifford, the abolition of tax-free shopping has had a “massively negative effect” on the country. “International tourists, whether they are from the Middle East or America, are spending less time in London,” he said. Clifford travels extensively to cities such as Milan, Paris and Madrid, and he’s noticed they’re much busier than London these days.

Shoppers Heading Elsewhere
Without tax-free shopping, many visitors shop in other European cities that would allow them to get better bargains. Some tourists fly into London just to pick out what they want and hop over to another city to buy it. From this trend, it comes that London is no longer appealing to shoppers as it was before.

“It really affected London, but actually right across the UK we saw that negative impact almost immediately. It is still having a massively negative effect,” added Clifford. He believes the UK needs a boost after facing so many challenges over recent years. “From pandemics to wars to elections to silly budgets to the cost of living crisis. I mean, you couldn’t make it up, really, could you?” said Clifford.

Controversy of the Tourist Tax
Described more appropriately as the ‘tourist tax’ perhaps, business leaders at large have broadly criticised it. It is not just the owners of shops on Oxford Street that are annoyed but also high-end designers and airport chiefs who have spoken against the move. Research last year suggested this could give the UK economy a staggering £4.1 billion annually by restoring tax-free shopping.

John Dickie of BusinessLDN said that ending the VAT reclaim scheme was an “economic own goal.” He said its reinstatement would be a spur to the flagging UK economy, as international visitors would be inclined to spend more money. This, in turn, will also mean spending on dining, hotel accommodation, and other such activities besides pure shopping.

Support from the Mayor
London Mayor Sadiq Khan has also thrown his full weight behind the idea of restoring tax-free shopping. He says that it would boost the numbers of international tourists in both London and the UK, helping local businesses and high streets in much-needed ways. Khan further claims it could even bring billions into the Treasury every year.

Kurt Geiger’s Success Amid Challenges
Meanwhile, despite these economic concerns, Kurt Geiger has been on fire. Sales earlier this year leapt 35% as demand for denim handbags and footwear linked to global gigs of pop star Taylor Swift’s Eras Tour surged. Annual sales for the brand were £360 mln for the year ending February 2024, while revenue surged 10% on a year before. They expect 2024 to be an even better year.

Kurt Geiger’s new global flagship store on Oxford Street, which opened in October, has beaten all sales forecasts and is expected to be its highest grossing outlet. And proves that while one part of the UK economy is performing badly, another is doing rather well.

The Big Picture
The debate on tax-free shopping indicates a greater issue that has to do with the value of attracting and retaining international tourists to a nation. In fact, with proper motives, many countries would become more appealing to visitors who, in turn, would spend money on various services to boost their economies. In the contrary, in the absence of such motives, like VAT refund schemes, countries stand to lose in this regard.

Eventually, it seems that the abolition of tax-free shopping weighed higher on the UK retail landscape. Though some businesses are still managing to do well, many have slowly started feeling the pinch. Whether the UK government will ever reinstate the tax-free shopping scheme in an attempt to provide a much-needed boost for the country’s economy remains to be seen as it continues to fight its way through economic turmoil.