Mulberry boss calls for VAT-free shopping to restore competitiveness

The boss of British luxury brand Mulberry has called on the government to bring back VAT-free shopping for international tourists, warning that an “unfair” tax burden is stifling investment and driving wealthy shoppers away from the UK.

Chief Executive Andrea Baldo said the move would help revitalize Britain’s luxury and retail sectors – which have been hard hit by a decline in visitor spending since the 2021 cancellation of VAT for foreign visitors – while boosting UK manufacturing and tourism revenues.

“Bringing back VAT-free shopping for tourists will be good for the economy,” Baldo said. “You are competing with Paris and Rome, and giving them an unfair advantage makes no sense.”

According to Global Blue data, spending by non-EU visitors in the UK remains at just 75% of pre-pandemic levels, compared to increases of 166% in Spain and 159% in France.

Mulberry estimates it has lost nearly £10 million on its UK sales since the VAT-free shopping scheme was scrapped. Baldo said the loss of international interest was particularly evident in London:

“We probably lost about a fifth of our international visitor traffic. Our stores in Dublin and Amsterdam have almost doubled their business from travelers.”

Baldo said reinstating the VAT rebate would directly support UK manufacturing, with Mulberry’s production sites in Somerset set to benefit from higher production if the policy is reversed.

The comments come as Chancellor Rachel Reeves faces mounting pressure to stimulate growth after the Office for Budget Responsibility warned that weak productivity will reduce Britain’s long-term economic potential, creating a £27 billion shortfall in the fiscal forecast.

Baldo admitted that reintroducing VAT-free shopping could be politically controversial, but said it was about international competition, not franchising: “It’s not about exempting tourists from taxes – it’s about leveling the playing field. Our competitors in Europe are already offering that.”

He added that removing the tax could provide an immediate boost to retail, hospitality and tourism, sectors important to the UK’s economic recovery.

“Our business will invest further in producing in the UK, and hotels, restaurants and high street stores will benefit from the influx of international shoppers.”

Since joining Mulberry a year ago from Danish brand Ganni, Baldo has sought to stabilize the company after years of turmoil, including shareholder tensions between Ong Beng Seng’s majority owner Challice Group and Mike Ashley’s Frasers Group, which holds a 37% stake.

Relations have improved since then, with Fraser now supporting Mulberry’s strategy and stocking 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 independent stores in major UK cities including Birmingham and Liverpool, as it focuses on reconnecting with British consumers.

Baldo said the company is working to rebuild its reputation as an accessible luxury brand while keeping its British heritage at its centre. Sales at its Regent Street store are up 16% year-to-date, and the relaunch of the popular Roxanne bag has attracted renewed interest from younger shoppers.

“We have good momentum, although it will take a minute to return to profitability,” Baldo said. “If we can leverage the love of the brand, we can grow the business.”

Baldo said Mulberry’s turnaround will succeed regardless of the government’s next fiscal steps, but warned that further tax hikes could damage fragile 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 urgently need.

“We are not asking for special treatment,” he added. “We demand fairness – and the opportunity to compete on an equal footing with the rest of Europe.”