Kiki McDonough, a favourite jewellery designer of Princess Diana, Kate Middleton and Queen Camilla, has cut the prices of her products by 20% in an attempt to offset the effects of the so-called “tourist tax”.
This summer, McDonough offered the discount to American and Australian shoppers, aiming to soften the blow of the scrapping of VAT-free shopping for tourists in 2020, a move introduced by then-chancellor Rishi Sunak.
The luxury goods industry has been vocal in its criticism of the negative impact of the policy, with McDonough pointing to a significant drop in American tourists, her second-largest market. The 20% discount has helped lure foreign customers back to her store in London’s Sloane Square. “It’s amazing how many people have come back,” she said.
The abolition of VAT-free shopping has seen tourist spending shift to other European countries such as France and Spain, while the UK has seen a decline. McDonough argues that luxury shopping is a key draw for tourists, with wider economic benefits. “Luxury is not seen as important in this country,” she said, highlighting the ripple effect it has on other sectors, including hospitality and tourism.
While the Office for Budget Responsibility estimates that scrapping tax-free shopping would save £540m over the next two years, McDonough believes Labour should reconsider reintroducing the benefit to boost economic growth. She stressed that it is not just about luxury goods, but also about the wider experience and spending associated with tourism.
McDonough, who founded her company in the 1980s, also expressed concerns about the government’s focus on large companies at the expense of smaller ones like hers. She called for reducing bureaucracy and providing more support for young entrepreneurs, and urged politicians to foster an environment that encourages risk-taking and business growth.
A Treasury spokesman confirmed that the government faces difficult decisions in the next budget, as it aims to address a £22bn gap in the public finances left by the previous administration.
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