As he slammed the UK’s decision to end tax-free shopping for tourists in its current form, the boss of footwear and accessories retailer Kurt Geiger has suggested that the firm could be forced to axe 600 jobs.
Calling the tax-free decision “ludicrous” and a “staggering own goal”, Neil Clifford said job losses would ensue.
Clifford said the decision to end the VAT refund perk for non-EU tourist shoppers would drive foreign income to other shopping locations outside of Britain.
The new rules come into force next year and mean international tourists will no longer be able to reclaim the VAT they paid while in Britain on items such as fashion and beauty when they’re at the airport. They’ll only be able to reclaim it if they use a ship-to-home option, something retailers have said tourists have no interest in.
Various estimates have suggested that up to 138,000 jobs could be lost as a result of the decision, but Clifford is the first retail exec to put a specific number on the redundancies that could happen.
The Mail reported him saying in a letter to Chancellor Rishi Sunak: “At a time when UK retail employment needs more support than ever before, it is ludicrous that it is poised to become the only country in Europe not to offer tax-free shopping.”
He also said that not only should the current situation continue but that it should be extended to EU shoppers once the UK leaves the EU, something that retailers had expected would happen.
He added that the decision “completely undermines the government's stated aim to build a ‘global Britain post-Brexit”.
The letter continued: “As you know, every country in Europe and most major tourist destinations worldwide offer tax-free shopping. Britain will become the only country in Europe not to offer it, putting our economy at a significant disadvantage. British shoppers visiting any EU country will be able to shop tax-free. Paris, Rome, and Berlin must be rubbing their hands with glee.”
Kurt Geiger relies “heavily” on tax-free sales to tourists via its 57 stores and especially its concessions in luxury department stores such as Harrods and Selfridges.
Trading is difficult enough at the moment. Clifford said the firm sold 67,000 pairs of shoes last week, but this was a year-on-year drop of 30% and the tough trading at present has already led it to cut 400 of its 2,200 staff members this year.
His letter comes as shirt-maker Turnbull & Asser, of which he’s also the chairman, could be forced to cut dozens of jobs if the duty-free plan goes through. Clifford said that in normal times, half of Turnbull & Asser’s sales are to international customers.
The firm had been planning to invest millions in its Jermyn Street store but said it may reconsider this decision. It could also “significantly downsize” its workforce of 70 if tax-free shopping ends.
In the letter, Clifford said the duty-free decision “will put the company at risk [and] will decimate the popular shopping [area] of St James's in central London”.
The Treasury has defended its plans to change the current rules and said of the decision not to extend tax-free shopping to EU visitors that it could cost £1.4 billion a year and “would mean subsidizing spending that already happens”. While that’s true, it ignores the potential increase in shopping visits by Europeans that could come as a result of them suddenly being able to buy their luxury goods with 20% off.
It also said only a small percentage of tourists currently claim back their VAT, although this could be partly due to the fact that the UK system is slow and paper-based, rather than being fast and digital as in many other countries.