Senior executives at the British luxury fashion house Burberry have made a direct appeal to Chancellor Rachel Reeves, urging her to bring back a tax-free shopping scheme for international visitors in her upcoming autumn budget.
A Call for Progressive Policies
In a clear push to stimulate the UK's visitor economy, Burberry's leadership has called for progressive policies designed to encourage spending from overseas tourists. The brand is specifically championing the return of a value-added tax (VAT) refund programme for foreign shoppers, a scheme that was abolished five years ago at the end of 2020.
The policy had a brief revival during Liz Truss's short-lived government in 2022 but was swiftly scrapped again by her successor, Rishi Sunak. Burberry contends that the UK has been at a competitive disadvantage ever since, with high-spending shoppers from the United States, the Middle East, and Asia choosing to make their luxury purchases in Paris and Milan instead of London.
An Opportunity for Growth
Burberry sees the Labour government's first budget, scheduled for 26 November, as a critical opportunity to reverse this trend. Joshua Schulman, Burberry's Chief Executive, stated during a media call that the government should implement policies that reinvigorate international visitor spending, that support jobs and stimulate growth across the whole visitor economy.
He directly linked a decline in the brand's London business to the removal of the tax break, saying, We know that our tourist business here in London has gone down ever since that refund was taken away. The proposed change would put the UK on a level playing field with other European nations.
Currently, UK sales account for less than 10% of Burberry's total revenue. However, Chief Financial Officer Kate Ferry indicated this figure could grow significantly if the VAT change was reinstated, telling reporters, Obviously at the moment [UK sales are] just 10% but it could clearly grow to be a lot more than that, if we had more tourism here.
Signs of a Turnaround Amid Restructuring
The appeal to the chancellor comes as Burberry shows early signs that its major restructuring plan, dubbed Burberry Forward, is beginning to yield results. The company reported that comparable store sales rose by 2% in the second quarter, marking the first growth in two years.
Losses for the six months to the end of September nearly halved. Adjusted operating profit swung to a positive £19 million, a significant improvement from the £41 million loss reported for the same period last year.
Schulman expressed cautious optimism, noting, We have begun to see customers return to the brand they love... While it is still early days and there is more to do, we now have proof points that Burberry Forward is the right strategic path.
This progress comes against a backdrop of significant cost-cutting. The restructuring plan, revealed in May, could lead to around 1,700 job cuts worldwide by 2027, including the entire night shift at its iconic raincoat factory in West Yorkshire. The company booked a £37 million restructuring charge in the last half-year, partly linked to redundancy payouts, which resulted in a reported statutory loss of £48 million.
Despite these one-off costs, CFO Kate Ferry projected confidence in the brand's financial future, stating, As we move into next year, I can certainly see a world where we're delivering strong profit, and good free cashflow.
