The UK Government’s failure to bring back tax-free shopping is not just foolish, it is bad business

By Marco Passoni

The arrival of the latest budget from the UK Chancellor last week brought me a glimmer of hope: Maybe the latest UK Government would see the stupidity of removing tax-free shopping and overhaul the ridiculous decision which was taken as Brexit came into effect more than a year ago.

Make no mistake, the damage of this policy has already begun to be done. Figures from Global Blue show that spend by American shoppers in France, Italy and Spain is already above 2019 levels and growing. In the UK, it is recovering to pre-pandemic levels. This foolish policy has already damaged the UK market’s attractiveness for consumers and competitiveness for brands.

But with China’s traditionally high-spending shoppers set to return, a u-turn by the UK Government would have given the country and its retail and travel retail sectors a fighting chance going forwards. It is a chance they have missed.

And the impact is just beginning to be felt. Representatives from the UK luxury sector has revealed that luxury brands are now prioritising Paris for investment in stores, as they are seeing better sales there. What is more, UK shoppers are now beginning to shop abroad, according to a report for Reuters, as they can take advantage of tax-free prices there. Yet still the UK Government continues to claim that its policy is good for the UK retail sector and will not have an impact on tourism.

The figures from Global Blue make for hard reading, but they underline the potential sales at stake here. American spending in the UK is at 101% of 2019 levels, in France it is 256% and in Italy 226%. For shoppers from the Middle East, the UK is still 35% down on 2019, while sales in France are at 198% and Italy 166%.

The impending return of Chinese shoppers will make this worse. In 2019, the UK was the second most popular destination in Europe for Chinese shoppers after France. Today, the UK sits fifth, behind Spain, Italy and Germany too.

It is unclear to me if Ministers have misunderstood the market, or are clinging to the hope their decision will come good, but our industries cannot afford to sit back and wait for them to figure it out. Every stakeholder with an interest in the UK travel retail and luxury sector should be shouting from the rooftops about this until those with the power to make a decision are at least forced to look again.

Marco Passoni has decades of experience in the travel retail sector. He has spent the majority of his career in senior leader positions throughout the market, including a 12-year tenure as CEO of a leading international Duty Free distribution company and a further 8 years running a retail firm that operated fashion mono-brand stores in several international airports.

Today, as Senior Executive VP and founding partner of 2.0 & Partners, he leads the company’s efforts in developing and innovating services which create new opportunities and partnerships for all members of the travel retail Trinity. A former elite-level sailor, with a World Championship to his name, Marco now spends much of his time airside, experiencing the changing travel retail industry first-hand, to better guide partners and clients on the best way to do business in this vibrant and unique market.