Will the government U-turn on the VAT Retail Export Scheme?

Image shows Sylvie Freund-Pickavance discussing the impacts of the removal of the UK VAT Retail Export Scheme on the British economy. Credit: Steve Watson.

Last week, we hosted two roundtables for the fashion and textiles. The first, was with Shadow Minister for Creative Industries and Digital, Sir Chris Bryant where industry leaders outlined the opportunities and challenges faced by the British fashion sector. 

The roundtable was preceded by a tour of the Design Museum’s ‘REBEL: 30 Years of London Fashion’ exhibition by Guest Curator Sarah Mower MBE. This allowed for the context of how politics and fashion could be a power play for the UK when combined effectively.

The meeting provided an opportunity for stakeholders within the sector to be heard and provided a strong overview of the current landscape of the British fashion sector. From opportunities for international business; British made and owned fashion procurement and onshoring opportunities; end-of-life strategies; barriers and opportunities for NEW GEN as well as existing talent within the UK and global markets; and a means for creative education to recentre sustainability within the curriculum. The EU has 16 pieces of legislation already in place for the fashion and textiles sector and it was noted that the UK has an opportunity to align and develop a sector which can operate in the local and global market with ease. 

Shadow Minister for Creative Industries and Digital, Sir Chris Bryant said: 

“The UK has a phenomenal set of talented individuals and international fashion brands that mean we can excel in a way no other country can. We bring verve, passion, edge and commercial savvy to the table. There are big challenges for the industry and Labour is determined to work with industry to make sure no talent is wasted.”

Image shows Kate Hills and Tamara Cincik in the House of Lords.

The second roundtable was facilitated with the support of Make it British, as well as Baroness Jane Bonham-Carter – the Liberal Democrat Lords Spokesperson for Culture Media and Sport, as well as the Liberal Democrat Creative Network and the Liberal Democrat DCMS Parliamentary Group in the House of Lords.

The purpose of the roundtable was to discuss the main challenges that post-Brexit agreements were posing to the British fashion sector, providing an opportunity for the top-line issues of Brexit to be heard. 

With the majority of the UK manufacturing sector made up of SMEs, the roundtable heard that Brexit has compounded a skills shortage. Issues of freedom of movement in both goods as well as talent as well as a massive impact to the luxury sector, tourism and hospitality due to the removal of the UK VAT Retail Export Scheme. 

Baroness Jane Bonham-Carter the Liberal Democrat Lords Spokesperson for Culture Media and Sport said:

“Yesterday’s presentation of the serious issues facing the Fashion Industry highlighted not only the self-inflicted damage caused by post Brexit regulations but also a serious growing skills shortage. The Liberal Democrats will redouble efforts to highlight ways that the Government could undo some of the damage done.”

A focus on reinstating the VAT Retail Export Scheme

One of the key findings from both roundtables, was that the unilateral decisions by the UK Government to end the lucrative VAT Retail Export Scheme, which Sylvie Freund-Pickavance cited as having the potential to generate £10bn in terms of sales, hospitality and tourism, was a missed opportunity. This is something that Fashion Roundtable have been consistently lobbying on.

The decision to scrap the VAT Retail Export Scheme and tax-free shopping concession was a governmental decision that was made in 2020. The decision to reinstate the scheme was once again dropped in 2022 by Chancellor Jeremy Hunt.

This decision has cost many British brands and retailers who rely on affluent international visitors and was a factor in Mulberry’s decision to close its iconic Bond Street store.

This week, Chancellor Jeremy Hunt has ordered the Office for Budget Responsibility (OBR) to review the costings of these policies which will be published alongside the Spring Budget on the 6th March.

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