Looking back at 2016 for the UK’s luxury sector is not as nostalgic as the viral social media trend might suggest. This year marks the 10th anniversary of Brexit; a political moment framed around sovereignty and economic growth. In its wake, came a series of policy shifts, including the withdrawal of VAT-free shopping for overseas visitors.
For the UK’s luxury industry, the combination has dismantled its competitiveness as a global shopping destination.
Few brands have articulated the impact as clearly as Burberry. “Business in our UK home market continues to be seriously impacted by the withdrawal of VAT refunds for overseas visitors in 2021, which has made the UK the least competitive destination in Europe for tourist shopping,” the brand stated in its 2025 full-year preliminary results. More recently, in Q3 2026, Burberry noted retail sales performance remained flat in EMEIA (Europe, the Middle East, India, and Africa), with locals offsetting declines in tourist spend.
While luxury’s global challenges — from post-pandemic price hikes to shifting consumer sentiment — have been well-documented, the UK’s policy environment has added a structural disadvantage at home.
The competitive gap widens
Generating £81 billion annually for the economy, the UK luxury sector supports 454,000 jobs and could grow to £125 billion with the right support, according to Walpole, the sector body representing British luxury across fashion, beauty, automotive, and hospitality.
Roughly 70% of that £81 billion is generated through exports. The remainder comes largely from international visitors shopping in the UK. The removal of tax-free shopping, Walpole argues, has created a double hit: international customer spending has shifted toward destinations like Paris, Milan and Madrid, which actively promote VAT refunds. Meanwhile, UK consumers can now shop tax-free in the EU.
Last year, affluent international visitors spent an average of €2,680 per person on luxury retail in Paris during Couture Week Fall/Winter 2025, while ultra-high-net-worth individuals (UHNWIs) splurged around €18,350 per person, according to Global Blue. The company, which tracks tax refunds, helps retailers leverage high tourist traffic to engage affluent spenders. The figures underline how fashion moments can translate directly to retail spend in destinations that actively incentivize international shoppers through tax-free schemes.
As London Fashion Week continues to position the capital as a global creative force, industry leaders argue the UK risks missing out on a similar spending surge without the commercial pull of VAT-free shopping.
The British Fashion Council (BFC) raised the issue with the UK government just this week, and continues to press for dialogue on what it sees as a critical priority for the fashion sector. “London and the UK are leaders in the global creative conversation, this week playing host to both London Fashion Week and the Bafta Film Awards. Both events attract a significant trade audience, but more should be done to welcome international cultural consumers,” BFC CEO Laura Weir says. “During Paris Fashion Week, Paris sees an uptick of over 20% in VAT-free shopping. Introducing a competitive VAT retail export scheme in the UK would drive tourism and incentivize visitors, benefiting not only the largest luxury businesses, but the myriad of SMEs in the fashion sector.”