Brits seeking luxury Louboutin shoes head to Europe following Brexit, dealt a blow to UK's high-end market
The luxury market has faced challenges in recent years, with rising US tariffs and reduced consumer demand in China being major factors. However, a significant change has occurred in the UK, which is now the only major global shopping destination not offering VAT-free shopping to international tourists. This change, brought about by Brexit, has had a profound impact on the British luxury sector.
Post-Brexit, Britons have become eligible for VAT-free shopping in the EU, a privilege that has made luxury goods in cities like Paris and Milan significantly cheaper for British consumers. As a result, British shoppers have been spending substantially more on VAT-free purchases, with a reported €854 million (£730 million) spent in 2024, a fivefold increase from 2021.
This shift has created a new shopping-led tourism market, where British travelers not only buy luxury goods tax-free but also spend heavily on hotels, restaurants, and transport in EU cities. Paris, for instance, saw a 44% increase in UK visitors in 2023, the highest rise among European tourists.
The impact on the UK's competitive edge and tourism industry has been negative. The UK’s abolition of VAT-free shopping has hurt its luxury retail sector, leading to export declines and a loss in revenues for iconic British brands like Burberry and Rolls-Royce. Walpole, the official body representing Britain's luxury sector, claims that luxury exports to the EU were "up to 43% lower than they may have been without Brexit".
The absence of tax-free shopping in the UK makes it less attractive for international and domestic shoppers, pushing them toward the EU, which still offers VAT refunds to visitors. British luxury brands risk losing ground to European rivals unless policies such as reinstating VAT-free shopping in the UK are implemented to attract shoppers back and boost retail and tourism revenues.
The EU market is not replaceable for British luxury brands, as they source many materials in Tuscan tanneries and continental brands buy from Scottish cashmere mills for their own products. The Government must seize the opportunity to smooth trade barriers with the EU, their closest and largest trading partner, to support the growth of the British luxury sector.
A YouGov poll shows that there is an appetite to spend more on luxury among Britons, with 25% buying a luxury product in the previous year and 45% happy to pay extra for premium brands. More than a third or 34% of luxury shoppers say they are likely to spend the same amount on luxury goods this year compared to the previous year.
The Association of International Retail (AIR) report states that this spending is not just a bit more, but a whole new shopping-led tourism market. Brits are increasingly directing their high-end spending towards brands and stores across the European Union. Delays, surprise courier fees, and inconsistent border checks have pushed EU customers to rival European labels, leading to negative reviews for UK brands.
In conclusion, the post-Brexit VAT-free shopping eligibility in the EU combined with the UK's scrapping of a similar scheme has driven Britons to buy luxury goods abroad, helping EU cities gain economically while the UK luxury retail and tourism sectors face significant challenges.
In light of the VAT-free shopping eligibility in the EU for Britons due to post-Brexit changes, luxury travel has become a significant trend, with many British consumers making tax-free purchases in European cities like Paris and Milan. This shift in spending habits has led to a surge in UK travelers, causing a 44% increase in UK visitors to Paris in 2023. However, this trend has negatively impacted the UK's luxury retail sector, with export declines and losses in revenues for iconic British brands such as Burberry and Rolls-Royce.
