Mulberry has told Andy Burnham that scrapping the tourist tax would put more work through British factories, in the clearest sign yet that luxury manufacturers intend to test the new Prime Minister’s promise of growth beyond the M25.
Chief executive Andrea Baldo said restoring VAT-free shopping for overseas visitors should be ‘high on the agenda’ for the new Prime Minister, arguing it would support jobs across the country, including at the handbag maker’s own manufacturing hub in Somerset.
The intervention lands as Mulberry’s losses narrowed from £32.2 million to £8.9 million, after a turnaround refocused on the home market. Sales rose 4 per cent to £125.5 million for the 52 weeks to 28 March, from £120.4 million a year earlier. Shares rose 5.8 per cent to 145p on Wednesday morning.
Baldo said axing the tax, which hundreds of businesses including Primark, Harrods and Burberry have urged previous governments to scrap, would ‘unlock an opportunity…which helps all the cities of the UK.’ He pointed to Liverpool and Manchester as particular beneficiaries, as well as London.
That framing is pointed. Burnham has pledged to deliver ‘good growth in every postcode’ with policies shifting economic and political power away from Westminster, and has already used the tax system to signal intent, scrapping VAT on household electricity bills on his second day in office. Mulberry’s argument is that VAT-free shopping is a regional policy dressed up as a London one.
Why this matters beyond the West End
For smaller firms, the tourist tax debate has always been about supply chains rather than shop windows. One luxury brand’s UK sales support component suppliers, packaging firms, logistics operators and the hospitality businesses serving visiting shoppers well beyond Bond Street.
Rishi Sunak and Jeremy Hunt scrapped VAT-free shopping, which allowed overseas visitors to reclaim 20 per cent on purchases. HMRC withdrew the VAT Retail Export Scheme from 1 January 2021, arguing the relief was costly and concentrated in the capital. European countries charge VAT but refund it to overseas visitors taking purchases home, leaving Britain an outlier.
Luxury firms have long called the loss an own-goal, hitting the UK economy while boosting sales in Paris and Milan, with some shifting investment towards China rather than London. Retail bosses have pressed successive chancellors on the same point, without success.
The Treasury’s resistance has been backed by the numbers-keepers. The Office for Budget Responsibility reviewed its costing of the abolition and concluded the measure was ‘unlikely to affect significantly the productive capacity of the economy’, a finding retailers dispute but have yet to dislodge.
The manufacturing argument
Baldo’s pitch is not simply about till receipts. There was a ‘great advantage’ in being able to offer tourists products manufactured in Britain, he said. Mulberry’s bags are made in Somerset.
‘Tourism is a big part of our business that we have completely neglected because of the situation in London’, he added.
‘I am sure that if we can unlock that, then we’re just going to produce more because people love the UK manufacturing story, and that’s obviously so important. So it’s connected. It’s not just trading retail, but it’s really truly connected with Somerset and the factories.’
The domestic recovery has been driven by lapsed customers returning for summery raffia bags and new versions of flagship lines such as the Bayswater. The relaunched Roxanne, first popular in the 2000s and now fronted by Wicked actress Cynthia Erivo, has pulled in old fans and Gen Z shoppers alike.
‘More than half of our retail and digital sales came from returning customers, demonstrating that we are winning back former clients who already know and love the Mulberry brand and the importance of regaining relevance in our home market in order to grow internationally,’ Baldo said.
The turnaround has leaned on reviving the firm’s ‘cool Britannia’ image from the 2010s, when ‘It girls’ such as Alexa Chung paraded its products. Distribution has widened through more concessions in John Lewis and Selfridges, and Baldo says the brand has found a ‘sweet spot’ in the £800 to £1,200 price range.
For firms further down the supply chain, the lesson is portable: a credible British-made story is worth paying for, and the customers most likely to buy it are the ones you have already sold to once.
Jamie Young
Jamie Young is Senior Reporter at Business Matters, covering SME finance, employment law and Westminster policy since 2016. He has reported on every Budget and Autumn Statement since 2018, helped make sense of the ‘covid era’ and the bounce-back loan scheme from launch through the fraud investigations, and broke the magazine’s coverage of the 2024 late-payment reforms. He joined Business Matters straight from completing his BA in Administration from Exeter University and is NCTJ-qualified. Reach him at jyoung@cbmeg.co.uk
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