Manju Malhotra, chief executive of Harvey Nichols, says the UK risks losing another summer of trade. VAT raid on foreign buyers before business “loses another summer.”
In an interview with The Telegraph, chief executive Manju Malhotra said: “I urge the government to really prioritize the elections.
“We all benefit from international business coming to the UK. Central streets, restaurants, museums – they all rely on visitors coming to the UK.
'We don't want to waste another summer'.
She warned that the removal of VAT refunds for tourists means overseas shoppers are 'getting used' to buying designer goods in Paris and Milan rather than London.
Ms Malhotra said: 'Tourists are spending less time and money in the UK. There is talk that the change is being considered as part of a tax policy overhaul, but the timing is not clear.”
This comes after data from tax-refund company Global Blue showed that foreign tourist spending in France has returned to 2019 levels, while in the UK it is just 64% of pre-pandemic levels. The UK abandoned its VAT-free shopping scheme after leaving the EU in early 2020.
Tourism falls behind
In a survey of Chinese tourists, the UK was named the least preferred destination among major European countries to travel in 2023.
At the same time, British shoppers have also begun to take advantage of duty-free regulations, visiting EU cities for their designer shopping rather than shopping closer to home. Global Blue found that in 2022, people in the UK spent around €500m (£434m) on goods for which they claimed tax refunds in mainland Europe, up 200% from 2021.
Ms Malhotra, who oversees eight Harvey Nichols stores in the UK and Ireland, as well as its overseas affiliates, praised France for doing a “really smart” job of bringing more foreign shoppers to Paris.
These include setting up kiosks at the Gare du Nord, where shoppers can easily get VAT refunds before returning to their country.
The Treasury has publicly rejected calls to change the “tourist tax” introduced when Mr. Sunak was chancellor. He said the re-introduction of tax-free shopping for visitors would cost UK taxpayers “an estimated £1.4bn a year, meaning taxes would have to rise to pay for this while we've already made difficult debt-reduction decisions.”
MPs are due to debate the policy in September in Parliament.
Ms Malhotra supported Burberry's suggestions that the government should consider alternatives, such as offering vouchers to overseas buyers as compensation for non-refundable VAT.
Whichever scheme is adopted, it “must be practical,” she warned.
Currently, for example, customers can buy goods in a store and then ship them back to their country to claim a VAT refund. But “they don't want to do that, they want to put on their new dress or their new bag now,” Ms. Malhortra said.
“Any tax-free equivalent should be simple and easy to use. Because if it doesn't, then customers simply won't use it.”
Eight Harvey Nichols stores in the UK and Ireland, as well as branches in Dubai and Hong Kong. Photo: Clara Malden
The anger in the luxury industry at the apparent evasion of ministers was palpable. Ms Malhotra said Labor “has taken more concrete steps to engage with business.” She suggested that a change in ruling party “might be welcome,” although she added that she would support whichever party was more responsive to business.
Ms Malhotra took over Harvey Nichols just 10 days before the start of the pandemic. The business has deep roots: it was founded as a lingerie shop in London in 1831 and then took center stage in cities such as Leeds, Manchester, Edinburgh and Birmingham. She now also has stores in Riyadh, one in Dubai, two in Hong Kong and one in Kuwait.
She said no retailer has escaped the cost-of-living pressure, but its customers “still want to be pampered” or choose Harvey Nichols for gifts. “Having a box of Harvey Nichols cookies says a lot about you as a giver or host,” she said.
Despite the relative wealth of customers, pricing remains a challenge when it comes to Harvey Nichols own-brand food and wines, as well as restaurants and bars.
His customers are no less sensitive to price increases than those of supermarkets or casual restaurants, even if they are sensitive to price increases. “After all, there is a limit to how much people will pay for a glass of champagne,” Ms Malhotra said.
Navigating the issue has been among its top priorities as it tries to get Harvey Nichols back on track.
Post-pandemic, the department store recorded pre-tax losses of around £40m in the year to the end of March 2021, up from £16m a year earlier.
Company reports, expected to be released soon, should show that Harvey Nichols has since taken steps in the right direction. It is expected to have a pre-tax loss of £30m for the year ending April 2, 2022. In terms of earnings before interest, taxes, depreciation and amortization, his losses have narrowed to £3.15m.
This relative resilience sets Harvey Nichols apart from some of the other mainstream department stores that have retreated from urban centers in recent years.
Shops including House of Fraser and Debenhams have been closed across the country. main streets, while John Lewis is doing a major overhaul of the space he has and has also closed the sites.
Ms Malhotra says rising utility costs, rents, and staff are to blame. But at the same time, downtown retailers are facing even more pressure from attempts to stop people entering cities, with policies like Ulez and congestion fees. Cities have also made parking more difficult and expensive.
3005 London most expensive driving
Ms Malhotra said: “People are much more likely to go to out-of-town shopping malls, which seem to work better, but which may not contribute as much to the fabric of society.” She said last Christmas' rail strikes were another blow and “it meant we saw more people couldn't get their orders.”
“The success of the main streets depends on people's ability to get to them.”
For now, despite the pressure, Harvey Nichols is building a presence on the UK's main streets, which Ms Malhortra says are spread out enough for most UK shoppers to visit if want.
More vacancies if anywhere, most likely to be abroad. “It may well be the right opportunity,” Ms. Malhotra said.
Recent Comments