Due to a lack of a tax incentive, London is losing ground to Paris (France) and Milan (Italy) as a tourist destination for high-spending shoppers, according to British luxury brand Burberry, after its UK-based sales suffered.

Overseas visitors to London will be unable to reclaim VAT on purchases made after Brexit until the end of 2020, putting the city’s upscale stores at a competitive disadvantage with rival European cities.

During this year’s political turmoil in the United Kingdom, former Prime Minister Liz Truss’s short-lived government announced a new VAT-free shopping scheme for international visitors in order to boost the retail, entertainment, and hospitality sectors.

A few weeks later, the new government, led by Prime Minister Rishi Sunak, got rid of the idea in order to save money.

Burberry finance director Julie Brown said that shoppers from the United States, the Middle East, and Asia were flocking to shopping districts in Paris and Milan, rather than Bond Street and Knightsbridge in London.

“We’re not seeing as much tourism in Britain as we used to because more tourists are going to Paris and Milan,” Brown told reporters.

The tax, she said, “was a real incentive for the luxury shopper, a real incentive to come to Britain.”

Tourists in European cities can reclaim sales tax on certain higher-priced purchases made at specific retailers.

According to Burberry’s most recent results, continental Europe, particularly France and Spain, outperformed the rest of Europe, the Middle East, India, and Africa in terms of sales growth, while British sales were in line with the average.

LVMH, which owns Louis Vuitton and Dior, and Kering, both of France, have recently outpaced Burberry’s sales growth.

“I think it would definitely bring tourists back to Britain if there was an alternative tax-free shopping scheme available,” Brown said.

Info source – Reuters