On January 1st 2021, the Treasury withdrew the tax-free shopping scheme in the UK — despite extensive campaigning by Walpole and its partners. The decision was greeted by dismay over its financial implications — and the Government’s lack of understanding of the importance of international high net worth customers (HNW) to the economy. Visitor numbers may be currently negligible due to travel restrictions, but there’s an urgent imperative for the luxury industry to work through the implications of this change for future international customers, who will now lack a significant incentive to travel here to shop.
Tourists are price-sensitive, with variability between international markets, and alternative ways will have to be found to create a value proposition for the international customer. MIB remains in place, but the export model will prove a logistical challenge for brands in reality. ‘Shop and Ship’ is not that appealing to modern consumers who want the instant gratification of taking goods with them from the shop, something that may prompt international travellers to shop elsewhere.
Suggested workarounds are few at present and currently range from streamlining measures, such as the VISA Waiver scheme for the UAE, to brands taking a hit to the bottom line by offering a discounted ‘international traveller price’. Walpole and its partners will continue to fight to overturn the decision throughout 2021, highlighting to MPs the importance of travellers coming to the UK to retail and watching the judicial review in February with keen interest. When international travel does resume, it will also track the spend of UK residents in Continental Europe, as people start to learn they can hop on a train or plane and buy higher-value items for less elsewhere — building on the data set that proves that without tax-free shopping the UK will miss out to Europe on HNW consumer spending that is vital to the economy.
