Andrea Baldo, chief executive of Mulberry, has called on the United Kingdom's new Prime Minister to abolish the tourist tax, asserting that restoring a VAT-free shopping scheme is essential for boosting British manufacturing and revitalizing luxury sales. Baldo stated that such a move should be a high priority, as it would create jobs across the country, including at the company's facility in Somerset.
The plea comes as Mulberry, the British handbag maker, reported narrowed losses of £8.9 million, down from £32.2 million, following a turnaround strategy that has re-centered the company's focus on its domestic market. Shares for the company rose 5.8 percent to 145 pence on Wednesday morning.
Baldo emphasized that eliminating the tax, which hundreds of businesses including Primark, Harrods, and Burberry have lobbied previous governments to scrap, would "unlock an opportunity" beneficial to all UK cities. He specifically highlighted Liverpool and Manchester as potential beneficiaries, alongside London.
Prime Minister Rishi Sunak and Chancellor Jeremy Hunt eliminated VAT-free shopping, which had allowed overseas visitors to reclaim 20 percent on their purchases. While European countries also charge VAT, they typically offer refunds to international visitors for goods taken home.
Luxury industry representatives argue that the removal of the UK's tourist tax break has negatively impacted the domestic economy, while simultaneously benefiting retail sectors in cities like Paris and Milan. Despite businesses consistently arguing for the broader economic advantages of reinstating the scheme, successive governments have shown reluctance.
Baldo noted the significant advantage of offering tourists products manufactured in Britain, such as Mulberry's bags, which are produced in Somerset. However, he also acknowledged that tourism, a crucial component of Mulberry's business, has been largely neglected due to the current economic climate. He expressed confidence that restoring the VAT-free shopping scheme would lead to increased production, capitalizing on the appeal of UK manufacturing. "It's not just trading retail, but it's really truly connected with Somerset and the factories," Baldo stated.
Mulberry's sales increased by 4 percent to £125.5 million for the 52 weeks ending March 28, compared to £120.4 million the previous year. Domestic sales have been bolstered by returning customers purchasing new items, including seasonal raffia bags and updated versions of signature products like the Bayswater handbag. The relaunch of the Roxanne bag, which first gained popularity in the early 2000s and is now promoted by actress Cynthia Erivo, has also helped re-engage long-term fans and attract younger shoppers.
Baldo added that more than half of the company's retail and digital sales originated from returning customers. "This demonstrates 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," he said.
The company's turnaround strategy has involved reviving its "cool Britannia" image from the 2010s and expanding its UK retail presence with more concessions in department stores such as John Lewis and Selfridges. Baldo indicated that products priced between £800 and £1,200 represent a successful market segment for the brand.