In My View by Eric Musgrave: The UK’s island mentality hits the luxury sector – and everyone else
When the commercial director of a British fashion brand admits he plans to buy a British-made watch in Spain so he pays less for it, you know our domestic retail industry is operating at a distinct commercial disadvantage.
Ian Earnshaw, commercial director of Mulberry, told the audience at the Walpole British Luxury Summit 2002 on 23 May, that it made sense for him to acquire his new timepiece when on a visit to Spain because, as a non-European Union citizen, he would have the 21% VAT on it refunded.
From 1 January 2021 the UK axed the VAT Retail Export Scheme that gave back non-EU customers 20% of the cost of their purchases. That was a handy bonus for high-spending punters from countries including the USA, Japan, China, the United Arab Emirates, Saudi Arabia, Israel, Switzerland and Russia (back in the days when they welcome here).
You may recall plenty of high-profile retailers and brands lobbied against this decision before it was implemented, but our industry by now must be used to being ignored by the Tories, the one-time “party of business”.
Walpole, the association that declares it “promotes, protects and develops British luxury worldwide”, represents the interests of more than 250 brands. Even its august membership, which stretches from Bentley Motors to Fortnum & Mason and from Mulberry to The Macallan whisky distillery, could not make the Treasury see sense.
In addition to the deterrent to visitors caused by this VAT “Brexit bonus” (ha, ha, apologies for that an unfunny joke), the UK remains at a colossal disadvantage against the 26 countries in Europe that offer tourists a “Schengen visa”.
Dating back to 1985, a Schengen visa is a short-stay permit (valid up to 90 days) allowing a foreign visitor to circulate freely in 26 countries - Austria, Belgium, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland.
Almost 10 years ago, Michael Ward, managing director of Harrods and Walpole chairman, was highlighting to me the competitive disadvantage the UK was at because it had not signed up to the Schengen agreement. He was doing it still at the Walpole event.
With an almost medieval suspicion of foreigners, the UK treats even wealthy and pro-British tourists as though they were illegal immigrants or potential terrorists. Our obvious competitors in the luxury and cultural arena, such as France and Italy, are far more accommodating and welcoming. In consequence, they see far more high-spending non-EU visitors than we do, as the summit’s attendees heard.
On the day of its conference, Walpole published a report entitled “What It’s Worth: Enabling the Return of the £30bn High-End Tourism Sector”, which sets out a series of policy and promotional recommendations to enable the UK to rival the European post-COVID recovery.
The report can be viewed here.
I enjoyed my day at the Walpole summit at The Londoner hotel in Leicester Square – it was very well-organised with an impressive roster of informative and thought-provoking sessions. It made me realise the top end of our industry shares quite a few problems with everyone else.
Walpole is concerned with the prosperity of the luxury sector, but challenges like the loss of the VAT refund and the difficulty of obtaining visitor visas impact all levels of the market. You might be surprised how many wealthy visitors head for Primark, for example.
We should be making it very easy for tourists to come here instead of somewhere else on continental Europe.
After its seven years in power, (or 12 if you include the coalition days), the visa and VAT farce is not the only thing on the current administration’s charge sheet.
The Conservative government’s failure to heed almost universal calls for a sensible and fair reform of our business rates system is, for me, another manifestation of our politicians’ pronounced detachment from the commercial world.
It makes you think they could not organise a piss-up in a brewery, but, of course, we know now they can manage lots of parties during lockdown.
On a more upbeat and fashionable note, I was very impressed by the number of women attending the Walpole summit in smart tailored suits. I would be delighted if this turns out to be a widespread trend as I consider trouser suits to be a versatile and practical look for women.
Anda Rowland, director at Savile Row tailor Anderson & Sheppard, looked particularly fabulous in a tailored denim suit from her company, but my Outfit of the Day award went to Walpole CEO Helen Brocklebank for a bright pink double-breasted suit made for her by bespoke tailor and Walpole member Kathryn Sargent.
Who doesn’t like to see power dressing done with panache?
