London's luxury retail trailing Milan and Paris, warns Harrods boss

London’s luxury retail scene is being outcompeted by rival European cities, the managing director of British department store Harrods has warned.

Michael Ward, who has been at the helm of Harrods since 2005, told The Telegraph that the government’s decision to scrap VAT-free shopping for tourists at the start of last year has put overseas shoppers off the English capital.

The wider retail industry has been urging the government to reverse its decision on VAT-free shopping, arguing that tourists are now opting for rival luxury hotspots like Milan and Paris where shoppers can still claim VAT back.

The industry has also disputed the government’s claim that scrapping VAT-free shopping for tourists would save 2 billion pounds annually.

“If I'm going to buy a Christian Dior saddlebag for 2,000 pounds, why wouldn't I buy it in Paris?” Ward said.

To keep consumers interested, Harrods is now working much harder to source designer goods that shoppers can not get in other European capitals, he said.

Ward urged the government to create a tourism strategy to tempt shoppers back to London.

“It’s actually really key to have - because we're competing against Europe, which has a very comprehensive tourism strategy and that is integrated across the whole of Europe. We need to be ahead of that,” he said.

Post-pandemic recovery

Last summer, the UK launched a tourism recovery plan aiming for the country to recover to pre-pandemic tourist numbers by 2023.

But there is still a way to go. The luxury retail industry was hit hard by the pandemic as stores were forced to close and international travel restricted.

London’s West End is expected to recover to its historic annual turnover of over 10 billion pounds by 2025, according to an October report commissioned by New West End Company (NWEC).

The report came as year-to-date sales were up 109 percent compared to 2021, while spending continued to outperform footfall.

Harrods has also been recovering since the end of lockdown restrictions. In the year to January 29, the company swung to a profit after tax of 41.7 million pounds from a loss of 57.3 million pounds a year earlier.

That came as turnover for the year increased 35.5 percent to 581.9 million pounds.