Harvey Nichols boss says France wins in race for global shoppers, also lures shoppers from UK

The boss of Harvey Nichols is the latest luxury retail executive to weigh in on the VAT-free shopping issue in the UK. But rather than just pleading for its return, Manju Malhotra has highlighted how France has deftly attracted both international shoppers away from Britain and is also successfully attracting British shoppers.

In an interview with The Telegraph, CEO Malhotra urged the Government to prioritise the issue before an election (which could possibly happen as early as May 2024). 

She said international shoppers are getting “into the habit” buying their luxury goods in cities such as Paris and Milan rather than London and that they’re spending less time and money in Britain overall. While she recognised that there has been talk of changes being made, she’s concerned at any timescale that could delay the issue, adding that “we don’t want to lose another summer”.

A number of studies have shown how the UK is losing out by not offering tax-free shopping for tourists on the same basis as it did previously, and also by having not extended the perk to EU shoppers after Britain left the bloc.

A few months ago, the Office for National Statistics International Passenger Survey showed that tourist visitors to the UK remain well below 2019 levels. That’s despite tourism to countries like France and Italy rebounding strongly.

And in April, The New West End Company (NWEC) — which represents businesses in one of the key shopping areas of London — said that almost 71% of international visitors to London are spending less due to the tax change.

Malhotra has a strong overview of the situation given that she runs eight luxury Harvey Nichols stores in the UK and Ireland as well as its branches in other countries. She said France has been “really clever” in getting more tourists to visit Paris with initiatives such as booths at Gare du Nord station, where shoppers can easily claim their VAT back before returning home.

Importantly too, the Gare du Nord is the terminal station for Eurostar services, which means a large number of British tourists visiting France can now easily take advantage of VAT-free shopping.

A report from Global Blue found that UK residents spent around €500 million (£434 million) on goods on which they claimed VAT back in Continental Europe in 2022. That was a 200% rise compared to 2021, although the figures would have been skewed given that pandemic restrictions were still in place in the previous year.

And another VAT-free payments specialist — Planet — has also said that shoppers from the UK are taking advantage of the fact that Britain is no longer in the EU and are spending in shops abroad rather than at home.

In March, it said that “British shoppers continue to be among the top five nationalities when it comes to tax-free spending abroad”. And Gen Z is particularly active here. Also, this demographic made up “over 30% of the share of spending across categories like luxury, department, and watches & jewellery stores”.

There have been concerns among such companies that specialise in VAT refunds that Britain isn’t geared up, technology-wise, to make speedy refunds to tourists, which is frustrating for international visitors. The aforementioned booths in France can process refunds super-fast, while the previous paper-based system in the UK can take hours.

Before VAT-free shopping was all-but-abolished, companies like Planet had been lobbying to try to get better systems put in place, but this didn’t happen.

As an alternative, a suggestion by Burberry has been supported by the Harvey Nichols CEO with the idea of offering overseas shoppers vouchers instead of them receiving the VAT back. That could have the double benefit of encouraging them to visit the UK again in order to spend such vouchers.