The boss of British luxury brand Mulberry has called on the government to reintroduce VAT-free shopping for international tourists, warning that the “unfair” tax burden is stifling investment and driving wealthy shoppers out of the UK.
Chief executive Andrea Baldo said the move would help revitalize the UK’s luxury and retail sector – which has been hit hard by falling visitor spending since the abolition of VAT refunds for foreign visitors in 2021 – while boosting UK manufacturing and tourism revenues.
“The return to VAT-free shopping for tourists would be beneficial for the economy,” Baldo said. “They are competing with Paris and Rome – there is no point in giving them an unfair advantage.”
According to Global Blue, spending by non-EU visitors to the UK remains at just 75% of pre-pandemic levels, compared to an increase of 166% in Spain and 159% in France.
Mulberry estimates the company has lost almost £10 million in sales since the VAT-free shopping system was scrapped. Baldo said the loss of international visitors had been particularly visible in London:
“We’ve probably lost around a fifth of traffic from international visitors. Our stores in Dublin and Amsterdam have almost doubled their sales from travelers.”
Baldo said the reintroduction of the VAT refund would directly support production in the UK, with Mulberry’s manufacturing sites in Somerset benefiting from higher production in the event of a reversal of the scheme.
The comments come as Chancellor Rachel Reeves faces growing pressure to boost growth after the Office for Budget Responsibility warned that weak productivity would reduce Britain’s long-term economic potential and lead to a £27 billion deficit in budget forecasts.
Baldo acknowledged that reintroducing VAT-free shopping could prove politically controversial, but argued that it was a question of international competition, not privilege: “It’s not about giving tax breaks to tourists – it’s about creating a level playing field. Our competitors in Europe are already offering this.”
He added that abolishing the tax could provide an immediate boost for retail, hospitality and tourism – sectors that are crucial to the UK’s economic recovery.
“Our company would invest more in manufacturing in the UK and hotels, restaurants and retail stores would benefit from the influx of international buyers.”
Since joining Mulberry a year ago from Danish brand Ganni, Baldo has been trying to stabilize the company after years of turmoil, including shareholder tensions between majority owner Ong Beng Seng’s Challice Group and Mike Ashley’s Frasers Group, which has a 37% stake.
Since then, relationships have improved: Frasers now supports Mulberry’s strategy and stocks its products in 15 Flannels stores, as well as Selfridges and John Lewis.
Mulberry, which raised £20m in new funding this year, plans to open up to five new standalone stores in major UK cities including Birmingham and Liverpool as it focuses on reconnecting with British consumers.
Baldo said the company was rebuilding its reputation as an accessible luxury brand while keeping its British heritage at its core. Sales at the Regent Street store are up 16% year-to-date and the re-release of the iconic Roxanne bag has sparked renewed interest among younger shoppers.
“We have good momentum, although returning to profitability will take a minute,” Baldo said. “If we can leverage the love of the brand, we can grow the business.”
Baldo said Mulberry’s turnaround would succeed regardless of the government’s next fiscal policy moves, but warned that further tax hikes could damage weak consumer confidence.
He described the return of VAT-free shopping as “the gift under the Christmas tree” that Britain’s luxury, retail and hospitality sectors desperately need.
“We are not asking for special treatment,” he added. “We demand fairness – and the chance to compete on an equal footing with the rest of Europe.”
