Brexit has left UK ‘worst shopping destination in Europe’, business chief tells Rishi Sunak

Post-Brexit changes to VAT shopping rules are a “spectacular own goal” for the UK, a business chief has told Rishi Sunak.

Gerry Murphy, chief executive of fashion brand Burberry, said the new rulebook would leave Britain the “least attractive shopping destination in Europe”.

The rebuke to Mr Sunak came as the prime minister gathered 200 high-profile chief executives at a Business Connect conference in London to try and convince them the government has “got your back”.

The Tory leader is trying to rescue his party’s reputation with commerce following a period of strained relations under Boris Johnson and Liz Truss.

Mr Murphy told the prime minister at the meeting on Monday that he believed Mr Sunak was “obviously more business-friendly than some predecessor administrations”.

But he said removing VAT refunds for tourists would compound the damage caused by leaving the single market and urged the government to reverse the measure.

“It is somewhat perverse that on the day that we left the single market, a decision by, I think it was by you as chancellor, to remove the VAT refund for tourists made the UK the least attractive shopping destination in Europe,” he said.

“Leaving the EU has had a significant friction effect on trade, hopefully not forever ... but it is the case it was a drag on growth.

“So we ask you to look at this specific one (VAT), this is a spectacular own goal, one that can be reversed by a decision from you or from the chancellor.”

Mr Sunak insisted that there “were good reasons” for the change, but said he would look at the data to “see if things are panning out as we expected to, or not”.

Since the end of the Brexit transition period at the start of 2021 tourists in the UK have been unable to claim back VAT on purchases made abroad – effectively making Britain 20 per cent more expensive for them.

The perk was briefly reintroduced by former chancellor Kwasi Kwarteng in his mini-budget last year, but along with most of his policies, it was scrapped by his successor Jeremy Hunt – who has since confirmed it will not return.

The government says that scrapping the VAT refunds will save the UK around £2bn a year, but tourism and retail bosses say it will seriously damage the UK's competitiveness as a holiday destination.

It sits alongside other new barriers for European tourists to come to Britain – such as new rules banning European ID cards as identification in lieu of passports, and plans to require EU tourists to pay a fee in advance before they can travel.

Labour's shadow chief secretary to the Treasury Pat McFadden said: “After 13 years, the pattern of Tory economic failure is grinding on.

“Families in Britain are being harder hit by price rises than many comparable economies.

“Other countries have had to cope with Covid and the consequences of the war in Ukraine, yet it is Tory Britain which sits at the top of the inflation growth league of major industrial economies.”

Earlier this month, the IMF said it expected the UK economy to grow slower than other developed G7 nations, with a contraction of 0.3 per cent this year before rebounding to grow by 1 per cent next year.