Mulberry Slams “Unviable” London, Blames Tax For Bond Street Closure
U.K. luxury retailer Mulberry is set to close the doors to its Bond Street, London store and has hit out at the sales tax scheme which is making London “unviable”.
Mulberry claims that it has been a victim of the so-called tourist tax, whereby international visitors can no longer claim back 20% sales tax following the U.K.’s exit from the European Union.
With representations from retailer leaders, luxury retail organization Walpole and London business body New West End Company falling on deaf ears, the question is how many other luxury retailers may follow Mulberry’s shock decision?
In reality, this was the chronicle of a death foretold.
Announcing chastening results in November last year, Mulberry boss Thierry Andretta had first issued a stark warning that upscale London retail had become “commercially unviable” and at that time he urged the government to reinstate VAT-free shopping (sales tax is called Value Added Tax [VAT] in the U.K.) for international tourists.
Andretta said that trade in the U.K. capital, across its stores on Bond St and Regent St, had plummeted.
Andretta added: “The U.K., and London particularly, has not seen the level of recovery that other European countries and cities are enjoying due in part to the lack of tax-free shopping. We urge the Government to reconsider its position on tax-free shopping to help the UK compete with its European neighbours.”
History Of U.K. Sales Tax
Tourists visiting Britain used to be allowed to reclaim sales tax on purchases up until January 2021, when the tax break was axed by then Chancellor, now Prime Minister, Rishi Sunak.
Since them the U.K.’s volatile political scene has hardly helped, with three leaders and three Chancellors presiding over the decision.
As Sunak’s replacement as Chancellor, Kwasi Kwarteng tried to reintroduce the incentive in his disastrous ‘mini-budget’, which instead saw him quickly ousted. However, incoming and incumbent Chancellor, Jeremy Hunt, then reversed the decision just a month later.
The U.K. Treasury claims the decision will save the country $2.4 billion a year, a figure fiercely disputed by some economists and by luxury retailer and brand organization Walpole, which produced data showing, it claims, that the policy will actually hit the public purse.
The incentive is still on offer in mainland Europe, with shoppers now flocking to Paris, Milan and Madrid instead and the knock-on effect for London is devastating, Mulberry’s Andretta warned.
“This is not just about encouraging tourists to shop, but also to experience everything that London and the U.K. has to offer — from its world class hotels, restaurants and theatres, to its museums and historical sites,” he added.
Mulberry Losses Mount
Mulberry estimates that nearly half of its trade used to come from international tourists in London but that a luxury Mulberry handbag is now far cheaper to buy overseas.
In its most recent update, the British brand reported sales for the year to October 2022 down 1% to $78.8 million. U.K. sales tumbled 10% to $41.2 million, leading to a loss of $4.6 million, compared with a $12.4 million profit the previous year.
Of its decision to close its Bond Street store, a Mulberry spokesman said: “The lack of VAT-free shopping in the U.K. has been particularly felt on Bond Street, which has always been an iconic shopping destination for tourists. The decline in visitors has impacted footfall and sales.”
Mulberry added that high rents and business rates have also conspired to make “the store commercially unviable resulting in us taking the difficult decision to close”.
In December, bosses at both Harrods and Selfridges also backed calls for a review of the tax.
And last month the finance chief at Burberry, Julie Brown, said post-pandemic demand from foreign tourists in London had bounced back at a much slower rate than in Europe. The biggest increase in spending was by Middle Eastern visitors which was up 122% in its European outlets, but just 14% in the U.K.