Tax Free shopping is growing in the UK, helped by the Brexit vote and the weaker pound - leading to demands for a bespoke service for elite tax-free global shoppers.
Trends in Tax Free Shopping in the UK
Tax Free shopping has become popular among many overseas visitors. Its impact on the UK economy is not at all marginal and it is likely to grow. The trend, indeed, has been positive over the past months. The Brexit vote, the weakening of the pound and the unexpected flow of tourism dramatically increased tax free spending in the UK.
Brexit: every cloud has a silver lining
The most immediate consequence of the June referendum has been a sharp drop in the pound, which has proved to be beneficial for tourism. According to data from the Office for National Statistics, the weak pound has attracted tourists to the UK on shopping sprees, causing a notable spike in tax-free spending by overseas visitors. In July, immediately after the referendum, the ONS recorded a growth of 5.9% in sales on the previous year.
The drop in the pound has attracted shoppers especially for luxury goods. A report published by the consultancy firm Deloitte shows that some designer items and other luxury goods now cost less in Britain in dollar terms than anywhere else in the world. Accordingly, ONS data recorded that sales of watches and jewellery grew by 3.1% in July from June and were 16.6% higher than in 2015. Ashley Boyd, the manager of the luxury British handbag maker Mulberry Group PLC, confirmed that sales since the vote have been “better than normal”, whereas Nicolas Bartoux, the owner of the Bartoux art gallery, said sales spiked significantly in the days immediately after Brexit.
There has also been an increase in the number of overseas visitors spending on luxury hotels . Edwardian Hotels London reported a 31% increase in the value of reservations since the vote.
Chinese tourists account for the largest portion of overseas spending, being around 32% of all the visitors. Chinese visitors appreciate British luxury brands like Aston Martin, Rolls Royce and Mulberry and shopping in the UK allows them to avoid the strict 30% Chinese taxes on luxury goods. Indeed, shopping is an important part of the holiday experience for Chinese travellers. In 2015, 81% of those travelling internationally planned on doing shopping during their trip.
This notwithstanding, the growth in Chinese tourist spending in the immediate aftermath of the referendum was only a “moderate” 6%.
The tourists who benefited most of the Brexit effect were from Japan, Indonesia and US. In July, spending by Japanese visitors grew by 96% compared with the previous year, while Indonesian travellers spent 88% more and US visitors 22% more. The growth in spending was smaller for Middle Eastern visitors, although Qatar remained the nation with the highest average spend per transaction, at £1,600.
A weak pound is just the immediate effect of a possible Brexit. But what could be the impact of a real Brexit on Tax free shopping on the long term? The European Travel Retail Confederation has made the case for the return of duty free shopping in airports: duty free was banned in 1999 for passengers bound for EU countries, but if Britain decides to leave the single market, duty free could have good chances to be restored.
According to Brian Collie, Chairman of Flio and former BAA Group Retail Director, “Brexit is a uniquely UK opportunity”. Britain could become an off-shore duty free zone for all international travellers, included EU residents.
The unexpected summer shopping spree
This summer, the weak pound combined with the usual increase in tourism during the summer months brought a significant growth in International tax free spending. The months of July, August, September and October have seen an increase of 7.37%, 18% and 41% year on year, respectively. In the city of London alone, tax-free spending by overseas visitors increased by 38% in August and 31% in September 2016 compared to the previous year.
About GB TaxFree
GB TaxFree provides retailers with a completely bespoke experience. This is a customised service for both merchants and tax free shoppers, as we appreciate everyone’s needs are different. We actively work to increase international footfall and are delivering significant results for customers such as WEMPE, Chopard and Rolex One Hyde Park.
The GB TaxFree team has a real passion to ensure the most outstanding service is delivered in every aspect. The VIP services provides range from meeting and greeting the customer kerb side at Heathrow and Gatwick, assisting the customer through their last journey before going home. We ensure that they receive their refund with no difficulty. This is a free service to the merchant and you can offer it to whichever of the retailer’s customers they choose. Their VIP customers are our VIP customers. While receiving the VAT back, we even ensure that the customer receives the denominations they prefer.