The fashion designer Sir Paul Smith has told Sky News that a campaign to overturn the so-called tourist tax is not just about “helping rich shoppers coming to buy cheap handbags”, but boosting the wider economy.
In an interview with Business Live, he explained why he added his name to a letter to the chancellor – signed by 400 business leaders – demanding the decision to scrap VAT-free shopping for international visitors is overturned.
It was reported over the weekend that Jeremy Hunt had asked the Office for Budget Responsibility to review the tax which, according to estimates, rakes in about £2bn for UK public coffers.
Image: Shoppers walk along Oxford Street in central London during the Boxing Day sales. Pic: PA
The tax break ended when the UK left the European Union in 2020.
It had previously allowed foreign visitors from outside the EU to reclaim VAT on purchases in Britain, in the same way they do when shopping across the bloc.
It was abolished by then chancellor Rishi Sunak on the grounds that the benefits were almost entirely enjoyed by a handful of businesses in central London.
Luxury brands, hotel and restaurant chains and tourism chiefs have lobbied strongly since that their recoveries from the COVID pandemic have been severely dented by overseas visitors choosing to spend their money in destinations like Paris and Milan instead.
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Sir Paul told Ian King: “It’s not always necessarily about rich shoppers coming to buy cheap handbags, it’s the fact that when they’re here, they do spend money in our great cities.”
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He made the case for an economic boost from tourism while revealing that a third of his business relies on the tourism market.
“My passion is that the Royal Academy, the National Gallery, the lovely hotels… all the European hotels we’ve seen come back after the pandemic and we haven’t so… it’s about bringing people to the country and seeing all the fantastic things we’ve got.”
Shares in luxury retailers were up on Monday in response to the story of the OBR’s review in The Sunday Times.
Burberry climbed 2.3% and Watches Of Switzerland Group rose 3.6% at the open.
Hotel stocks were also up, though not by as much.
The hospitality sector argues that the tourist tax has been a factor behind its need for additional support since the pandemic.
The recently released hospitality market monitor from CGA by NIQ and AlixPartners showed that 6,180 licensed premises had closed between December 2023 and the same month a year earlier.
It meant that almost 23,000 venues had closed in total over the past three years, with the cost of living crisis and impact of interest rate rises to control inflation taking an additional toll.
Russell Nathan, senior partner at the accountancy firm HW Fisher, suggested he would be surprised to see no action on the issue at the budget.
“The chancellor can no longer ignore the significant damage that has been done,” he wrote.
The UK economy and its reputation amongst tourists has suffered dramatically… beyond increased sales and the number of tourist visitors, the reversal will also entice overseas retailers to invest more in the UK, which in turn will create new job opportunities across the entire supply chain.”
Marks & Spencer (M&S) has ordered hundreds of agency workers at its main distribution centre to stay at home as it grapples with the unfolding impact of a cyberattack on Britain’s best-known retailer.
Sky News has learnt that roughly 200 people who had been due to undertake shift work at M&S’s vast Castle Donington clothing and homewares logistics centre in the East Midlands have been told not to come in amid the escalating crisis.
Agency staff make up about 20% of Castle Donington’s workforce, according to a source close to M&S.
The retailer’s own employees who work at the site have been told to come in as usual, the source added.
“There is work for them to do,” they said.
M&S disclosed last week that it was suspending online orders as a result of the cyberattack, but has provided few other details about the nature and extent of the incident.
In its latest update to investors, the company said on Friday that its product range was “available to browse online, and our stores remain open and ready to welcome and serve customers”.
“We continue to manage the incident proactively and the M&S team – supported by leading experts – is working extremely hard to restore online operations and continue to serve customers well,” it added.
It was unclear on Monday how long the disruption to M&S’s e-commerce operations would last, although retail executives said the cyberattack was “extensive” and that it could take the company some time to fully resolve its impact.
Shares in M&S slid a further 2.4% on Monday morning, following a sharp fall last week, as investors reacted to the absence of positive news about the incident.
At that price, the company’s founder and chief executive, Will Shu, would be in line for a windfall of more than £170m.
Deliveroo further announced, before trading on Monday, that it had suspended its £100m share buyback programme.
The opening share price reaction took the value to 171p per share – still shy of the 180p on the table – and well under the 390p per share flotation price seen in 2021.
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Deliveroo’s shares have weakened nearly 50% since their market debut.
The deal is not expected to face regulatory hurdles as it provides DoorDash access to 10 new markets where it currently has no presence.
But a takeover would likely represent a blow to the City of London given the anticipated loss of a tech-focused player.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “If the deal is done at that price, the company will fail to shake off the ‘Floperoo’ tag it was saddled with after its disastrous IPO debut in 2021.
“Even though Deliveroo has finally broken through into profitable territory, the prolonged bout of indigestion around its share price has continued.
“The surge in demand for home deliveries during the pandemic waned just as competition heated up. Deliveroo’s foray into grocery deliveries has helped it turn a profit but it’s still facing fierce rivals.”
She added: “The DoorDash Deliveroo deal will be unappetising for the government which has been trying to boost the number of tech companies listed in London.
“If Deliveroo is purchased it would join a stream of companies leaving the London Stock Exchange, with too few IPOs [initial public offerings] in the pipeline to make up the numbers.”
A trade deal with the US is “possible” but not “certain”, a senior minister has said as he struck a cautious tone about negotiations with the White House.
Pat McFadden, the Chancellor of the Duchy of Lancaster, told Sunday Morning with Trevor Phillips there was “a serious level of engagement going on at high levels” to secure a UK-US trade deal.
However, Mr McFadden, a key ally of Sir Keir Starmer, struck a more cautious tone than Chancellor Rachel Reeves on the prospect of a US trade deal, saying: “I think an agreement is possible – I don’t think it’s certain, and I don’t want to say it’s certain, but I think it’s possible.”
He went on to say the government wanted an “agreement in the UK’s interests” and not a “hasty deal”, amid fears from critics that Number 10 could acquiesce a deal that lowers food standards, for example, or changes certain taxes in a bid to persuade Donald Trump to lower some of the tariffs that have been placed on British goods.
And asked about the timing of the deal – following recent reports an agreement was imminent – Mr McFadden said: “We’ll keep working with the United States and keep trying to get to an agreement in the coming weeks.”
As well as talks with the US, the UK has also ramped up its efforts with the EU, with suggestions it could include a new EU youth mobility scheme that would allow under-30s from the bloc to live, work and study in the UK and vice versa.
Mr McFadden said he believed the government could “improve upon” the Brexit deal struck by Boris Johnson, saying it had caused “an awful lot of bureaucracy and costs here in the UK”.
He said “first and foremost” on the government’s agenda was securing a food and agriculture and a veterinary agreement, saying it was “such an important area for the UK and an area where we’ve had so much extra cost and bureaucracy because of Brexit”.
He added: “But again, as with the United States, there’s no point in calling the game before it’s done. We’ve still got work to do, and we’re doing that work with our partners in the EU.”
The Cabinet Office minister also rejected suggestions the UK would have to choose between pursuing a trade deal with the US and one with the EU – the latter of which has banned chlorinated chicken in its markets – as has the UK – but which the US has historically wanted.
On the issue of chlorinated chicken, Mr McFadden said the government had “made clear we will not water down animal welfare standards with either party”.
“But I don’t agree that it’s some fundamental choice beyond where we have to pick one trading partner rather than another. I think that’s to misunderstand the nature of the UK economy, and I don’t think would be in our interests to put all our eggs in one basket.”
Also speaking to Trevor Phillips was Tory leader Kemi Badenoch, who said the government should be close to closing the deal with the US “because we got very close last time President Trump was in office”.
She also insisted food standards should not be watered down in order to get a deal, saying she did not reach an agreement with Canada when she was in government for that reason.
“What Labour needs to do now is show that they can get a deal that isn’t making concessions, so we can have what we had last month before the trade tariffs, and we need serious people doing this,” she said.