Britain is ‘losing out’ because of tourist tax

Britain is losing out on high-spending tourists, the boss of Longchamp warned as he called for tax-free shopping to be reinstated.

Jean Cassegrain, the chairman and chief executive of the French handbag brand, said the return of tourism since the pandemic had been “less strong in London than on the Continent” after duty-free shopping was scrapped following Brexit.

“For many, the No 1 reason for travelling is shopping,” he said. “Most shoppers are not against a good deal. If tourists can get a better deal in Paris than in London, then they will go there instead.”

The scheme, which allowed international visitors to reclaim 20 per cent VAT on purchases made in the UK, was withdrawn in 2021 in the wake of the country’s exit from the European Union. Since then luxury goods brands such as Burberry, Mulberry and Watches of Switzerland have warned that wealthy tourists are travelling to cities such as Paris and Milan rather than to London and elsewhere in Britain.

Caroline Rush, chief executive of the British Fashion Council, said this month that the so-called tourist tax not only was affecting luxury retail businesses, but also was having “an impact on the sector at large, all the way through the supply chain, right the way through to tourism and hospitality. It’s making it really difficult for the UK.”

Analysis by the Centre for Economics and Business Research has suggested that the removal of tax-free shopping has deterred two million tourists a year from visiting the UK and is costing £11.1 billion in lost annual GDP.

Under the Conservative government, Jeremy Hunt launched a review into whether the scheme should be reinstated. However, the former chancellor decided not to bring it back after the Office for Budget Responsibility estimated that restoring the scheme would cost £2 billion.

Longchamp believes more shoppers would spend at its store on Regent Street in central London if the “tourist tax” was abandoned

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Cassegrain, 59, said he would “very much” like the new government to consider restoring VAT-free shopping. “That would put London on an even playing field again with the Continent,” he said.

The French leather goods company was founded in Paris in 1948 by Cassegrain’s grandfather, also called Jean Cassegrain. The label is synonymous with its Le Pliage canvas, which is often spotted on the arms of celebrities and royals including Dame Mary Berry, Kendall Jenner and the Princess of Wales. The nylon tote has recently become a Gen Z favourite, with influencers describing it as a “book bag” choice for students and a “beginner designer bag”, thanks to its accessible price points. Prices range from about £80 to £450.

Longchamp is one of the few remaining family-owned leather goods makers in France. In 2020 Cassegrain’s two sons, Adrien and Hector, fourth-generation family members, joined the company, and Jean Cassegrain succeeded his father as chairman and chief executive.

He said there was “no chance” of the family selling the business, even after attracting takeover interest from some of the big European luxury players. “We very much intend to stay independent,” he said. “We think it’s one of the things that make us original and a little bit unusual in the landscape.” However, he admitted that running an independent business could be more difficult sometimes “because we are alone. We don’t have a big brother to help us.”

The global luxury sector had been squeezed by higher inflation and the cost of living crisis, Cassegrain said, but Longchamp had been strongly placed to overcome those challenges because of its more “affordable” price points. “We are not seeing any slowdown and we are still growing quite significantly,” he said. “We have a unique position in the market that resonates well with the customer.”

The company, which is tight-lipped about its financial results, reported a 44 per cent increase in revenue last year.