Burberry Urges UK to Bring Back Tax-Free Shopping
Leaders at the iconic British fashion house Burberry are publicly urging Chancellor Rachel Reeves to reintroduce tax-free shopping for international tourists, positioning the move as a critical step to stimulate the UK's economy. The appeal is timed ahead of the autumn budget, scheduled for November 26, with executives arguing that such a policy would significantly increase spending from overseas visitors.
A Call to Revive Tourist Spending
Burberry's leadership contends that the United Kingdom is losing valuable tourist revenue to European rivals. Since the value-added tax (VAT) refund program for foreign shoppers was eliminated at the close of 2020, destinations like Paris and Milan have become more attractive for high-spending tourists from the US, Asia, and the Middle East.
Chief Executive Joshua Schulman emphasized the need for "progressive policies" to revitalize the entire visitor economy and support job creation. He stated that restoring the VAT refund scheme would bring the UK in line with other major European shopping destinations, noting a clear decline in London's tourist-driven business since the program was halted.
The policy has had a turbulent history. After being scrapped, it was briefly resurrected in 2022 under Liz Truss's government, only to be cancelled again just weeks later by her successor, Rishi Sunak.
Impact on British Business
The absence of tax-free shopping has a direct impact on Burberry's domestic performance. Chief Financial Officer Kate Ferry highlighted that UK sales currently represent less than 10% of the brand's global revenue. She expressed confidence that this figure could expand substantially if a more favorable tax environment encouraged more tourists to visit and shop in Britain.
This advocacy comes as Burberry begins to see positive results from its strategic overhaul. The company's turnaround plan, dubbed "Burberry Forward," is showing early signs of success. For the first time in two years, comparable store sales have increased, rising by 2% in the second quarter.
Financial Turnaround and Restructuring
The push for policy change is set against a backdrop of significant internal transformation for the brand. Burberry is undergoing a major restructuring initiative announced in May, which aims to cut costs and improve profitability, potentially affecting up to 1,700 jobs globally by 2027.
Financially, the company's efforts are yielding mixed but promising results. For the six months ending in September, Burberry posted an adjusted operating profit of £19 million, a significant improvement from the £41 million loss recorded in the same period last year.
However, after accounting for a £37 million charge related to restructuring activities, including redundancy payments, the company reported a net loss of £48 million. Despite this, it marks a substantial reduction from the £80 million loss reported in the previous year. The leadership team remains optimistic, with the CFO foreseeing a future of strong profits and healthy cash flow as the transformation progresses.
