Brits are swapping London’s glittering storefronts for Paris’ grands magasins and Milan’s Quadrilatero della moda — and the numbers behind the posh exodus are startling.
Since tax-free purchasing turned doable for UK guests within the EU after Brexit in January 2021, British shoppers have more and more directed their high-end spending in direction of manufacturers and shops throughout the Channel.
In line with a latest report revealed by the Affiliation of Worldwide Retail (AIR), Britons shelled out €854 million (£730mn) on VAT-free purchasing within the EU in 2024, a five-fold leap from €169mn in 2021.
“This isn’t the identical folks spending a bit extra — it’s a complete new shopping-led tourism market spending moreover on motels, journey, eating places, and so on.,” the AIR report said.
When the UK left the European Union, its customers turned non-EU guests or third-country travellers and immediately turned entitled to VAT-free purchasing.
In line with the EU’s VAT directive, retailers within the bloc should present customers with the choice of reclaiming a minimum of 15%, with most international locations making use of a median charge of 20%, of the price of the merchandise. This may be significantly interesting in terms of high-end or luxurious gadgets.
Say you resolve to purchase the TikTok-viral Loewe Puzzle Bag throughout a visit to Paris or Spain. The small one retails at round €3,600 and the massive one is at present priced at round €4,200, based on costs listed on Loewe’s official web site.
With the VAT returns, you’ll get €700 again for the small bag and €840 for the massive one. Out of the blue, a weekend journey to the continent might sound extra interesting.
“So, they’re spending a whole lot of tens of millions of further euros on motels, eating places, transport, enjoyable… at Britain’s expense,” the AIR report added, highlighting the blow to UK tourism.
In line with the Paris Tourism Workplace, there was a 44% spike in guests from the UK visiting the French capital in 2023, the very best improve amongst European vacationers within the rating.
No VAT-free advantages within the UK
When the UK left the EU in January 2021, it proceeded to abolish its earlier VAT scheme, citing price and complexity.
This made the UK the one main world purchasing vacation spot not providing VAT-free purchasing to any worldwide vacationers. The one method you may at present purchase VAT-free items within the UK is that if they’re purchased on-line and shipped on to an deal with outdoors the UK.
Northern Eire has retained a VAT-free scheme, that means that if you buy items there as an EU citizen and fly out inside three months, you’re going to get your VAT tax returned to you upon leaving.
Even big-ticket gadgets folks purchase on the airport — equivalent to within the shops within the duty-free space — have been stripped of the VAT-free standing. So for UK travellers who would normally buy laptops, smartphones or designer cosmetics on the airport, largely the identical costs apply as those they pay in shops at residence. Alcohol and tobacco purchases are exceptions, as these may be purchased duty-free.
Luxurious retailers are livid
Britain’s luxurious foyer is sad concerning the tax adjustments.
Walpole — the official physique representing Britain’s luxurious sector together with Rolls-Royce, Burberry, and Harrods — revealed a research in Could, claiming that luxurious exports to the EU have been “as much as 43% decrease than they might have been with out Brexit”.
Within the trend and equipment sector alone, Brexit incurred a 64% loss.
“This factors to a considerable ‘Brexit impact’ on this trade which helps over 450,000 jobs and contributes £14.6 billion (€16.8bn) to the Exchequer” the report continues.
Crucially, British luxurious manufacturers should not simply shedding gross sales to European rivals, they’re additionally watching demand for UK-made items stoop throughout the EU and world markets.
The posh trade is uniquely dominant in Europe’s historical past, having emerged from centuries of workmanship and artisanal work matched with the most recent developments in artistry and design.
“Luxurious is a worldwide phenomenon, but it surely calls the UK and Europe its residence,” Walpole CEO Helen Brocklebank stated in a press release.
The EU at present produces 74% of worldwide luxurious items, and 62% of these items are exported outdoors the EU, based on the European Fee — a revenue alternative the UK luxurious trade is lacking out on.
“The British luxurious sector has unimaginable development potential, with a projection to succeed in £125bn (€144bn) by 2028,” Brocklebank continued.
“Nonetheless, to realize this ambition, we can’t afford to have one arm tied behind our again. Sturdy hyperlinks and beneficial buying and selling with Europe stay important to reaching this forecast, alongside our success in different world markets and key to supporting craft-led and excessive worth manufacturing within the UK.”
Manufacturers report that delays, shock courier charges and inconsistent border checks have pushed EU clients to rival European labels and left a path of damaging critiques for UK manufacturers, resulting in a confidence shock on the continent that manufacturers should not capable of quell on their very own with out coverage adjustments.
They declare that the EU market isn’t replaceable, particularly that they can’t simply pivot to a different market that will match the demand.
Continental Europe is each their greatest buyer base and the linchpin of their provide chains, with manufacturers sourcing many leathers in Tuscan tanneries and continental manufacturers shopping for from Scottish cashmere mills for their very own merchandise.
“At a time of worldwide uncertainty and commerce challenges, the Authorities should seize the chance to clean the commerce boundaries with our closest and largest buying and selling accomplice,” Brocklebank continued.
Other than the UK-EU relations, luxurious gross sales have confronted further challenges from rising US tariffs and diminished client demand in China.
Brits love their luxurious
A YouGov ballot reveals there’s an urge for food to spend extra on luxurious. In line with a 2024 research, 1 / 4 of Britons purchased a luxurious product within the earlier 12 months and 45% of these customers say they’re completely happy to pay additional for premium manufacturers. Greater than half spent as much as £500, whereas 9% blew by means of £5,000.
Greater than a 3rd or 34% of luxurious customers say they’re prone to spend the identical quantity on luxurious items this 12 months, in comparison with the earlier 12 months.
So till Westminster considers relaunching some type of VAT-free equal advantages, each swipe of a British card within the EU might ring up one other missed sale at residence.