UK. Heathrow Airport today repeated its call for the UK government to reinstate tax-free sales for overseas visitors as the company announced solid first-quarter results, with revenue increasing sharply and losses cut.
Heathrow has been lobbying for the return of tax-free sales for tourists after the UK government’s latest budget in March excluded a provision to reinstate this scheme – despite urgings from the airport company alongside a coalition of aviation, tourism and travel retail industry players.
In the airport company’s three-month results announcement, CEO John Holland-Kaye said: “We are building our route network to connect all of Britain to the growing markets of the world – now we need the government to lure international visitors back to the UK by scrapping the ‘tourist tax’.”
As reported, the tax-free scheme, which entitles foreign visitors to a VAT refund for goods purchased from the high street and airports or other departure points in the UK, was discontinued in 2021 under post-Brexit rules. This affected the sales of goods across various categories including fragrances, cosmetics, fashion, luxury and consumer technology.
Leading UK media Daily Mail recently launched a ‘Scrap The Tourist Tax’ campaign that supports the aims of the travel retail coalition.
Writing today in that newspaper, Heathrow Retail Director Fraser Brown said: “With goods up to +20% more expensive that elsewhere in Europe, passengers’ wallets are remaining firmly shut in the UK.”
Brown added: “As Britain’s gateway to the world, Heathrow has a front row seat watching the repercussions of this utterly misguided policy.
“It’s just not viable for the high-end brands to stay open here, so they shut up shop. Meanwhile, airports elsewhere in Europe are rubbing their hands with glee as passengers choose to spend their money at Paris’s Charles de Gaulle or Fiumicino in Rome.
He concluded with a warning about the longer term consequences of the policy for the UK economy.
“We understand the fiscal challenges the Government has. But, fundamentally, we think they’ve got this wrong. We’re calling on them to do the right thing and reverse the policy to make sure we can get back to the world-leading position we had in travel retail. Otherwise, the entire United Kingdom economy will struggle to take flight.”
"Leaving the EU has had a significant friction impact on trade."
Rishi Sunak gets shown up by Burberry CEO Gerry Murphy, who exposes the Tories' "perverse" post-Brexit decision making. pic.twitter.com/shbwYrEFha
— PoliticsJOE (@PoliticsJOE_UK) April 24, 2023
Separately, at a Business Connect event in London on Monday, fashion house Burberry’s Chair Gerry Murphy challenged Prime Minister Rishi Sunak about the scrapping of the tax-free regime for overseas visitors.
In urging reconsideration of that decision, Murphy told Rishi Sunak (listen to his comments via Twitter above): “We are actively exporting business as a result of that policy to our continental competitors. This is a spectacular own goal, one that can be reversed by a decision from you or the Chancellor.”
While the UK Treasury asserts that removing the tax-free scheme will raise an extra £2 billion to restock its drying coffers, it is a “false economy” according to the Daily Mail campaign.
Citing a study by Oxford Economics, the title said that reinstating tax-free shopping for tourists would draw more than 1.6 million extra tourists, driving the GDP by £4.1billion and generating about 78,000 jobs.
As noted, above, Heathrow revenue for the three months to 31 March climbed by +57.8% year-on-year to £814 million.
In the three months ended 31 March 2023, retail revenue increased by +47.5%, driven by higher numbers of departing passengers, car parking revenue and premium services. Retail revenue per passenger decreased by -15.7% to £8.82.
The airport company announced adjusted losses of £139 million, though it noted that the figure was related to the UK Civil Aviation Authority’s revenue allowance for the latest regulatory period (H7), recently announced, which Heathrow is currently disputing.
Passenger numbers in Q1 leapt by +74% year-on-year (from a low base in 2022) to reach 16.9 million.
Heathrow said: “We have revised our 2023 traffic forecast to a range of 70 million to 78 million passengers. We have seen a strong recovery in demand over the first quarter, which we expect to continue over the rest of the year.” ✈
