Loss of tax-free tourist shopping blamed for Selfridges job losses

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Selfridges is facing new job losses, blaming the discontinuation of tax-free shopping for tourists and a downturn in luxury spending.

In a communication to staff, Andrew Keith, the chief executive of the luxury department store group, cited the cessation of tax-free purchases for international visitors as a primary factor behind the latest round of redundancies.

Approximately 70 redundancies are anticipated, marking the second wave of job cuts within nine months at Selfridges. The withdrawal of VAT-free shopping privileges for international visitors has reportedly impacted sales at the luxury department store, which relies partly on affluent foreign tourists for footfall and purchases.

Retailers, including Selfridges, have implored the government to reinstate tax-free shopping for tourists, highlighting the competitive disadvantage faced by UK destinations compared to European counterparts like Paris, Milan, or Barcelona.

Despite reporting a 29 per cent increase in revenue to £843.7 million for the year ending January 28, 2023, Selfridges Retail experienced narrowed pre-tax losses to £37.9 million from £121.5 million during the same period. Keith acknowledged external challenges in the memo to staff, hinting at a potential shift away from online shopping and emphasizing the need to prioritize the company’s tech and digital roadmap.

Selfridges clarified that shop employees would not be impacted by the layoffs, which would predominantly affect other areas of the business. The proposed reduction in headcount equates to approximately a 2 per cent decrease in overall staff numbers, with hopes to provide redeployment opportunities for affected individuals.

The discontinuation of the tax-free shopping scheme, which allowed international visitors to reclaim 20 per cent VAT on purchases, was instigated in January 2021 by Rishi Sunak during his tenure as chancellor. Luxury retailers like Mulberry and Burberry have voiced concerns over the decision’s adverse effects on sales in the UK, with Mulberry indicating weak demand for its products and Burberry issuing profit warnings amidst a sales slowdown.

The absence of VAT-free shopping has been particularly felt in iconic shopping destinations like Bond Street, leading to closures and operational challenges for luxury retailers.