Royal Jeweller Slashes Prices to Combat 'Tourist Tax' Impact

Kiki McDonough, a renowned jeweller favored by British royalty, has implemented a 20% price reduction for American and Australian customers during the summer months. This strategic move aims to mitigate the effects of the so-called 'Tourist Tax', which came into effect when VAT-free shopping for tourists was abolished in 2020.

The luxury industry has expressed significant concerns about this policy change, initially implemented by Rishi Sunak during his tenure as Chancellor. Industry leaders argue that the removal of tax-free shopping has led to a decline in sales and deterred affluent international visitors from choosing London as a destination.

McDonough highlighted the noticeable impact on her business, stating, "We used to get a lot of Americans in summer. America is my second biggest market, and [there has been] definitely less people. It's amazing how many people were then brought back [with the discount]."

Data from the previous year revealed a decrease in spending by American tourists in Britain, contrasted with increased expenditure in France and Spain. This trend underscores the potential economic ramifications of the 'Tourist Tax' on the UK's luxury sector and broader tourism industry.

McDonough emphasized the often-overlooked importance of luxury retail to the UK economy: "Luxury is not seen as important in this country, and it's so wrong, because it's what attracts so many people to this country. They all think it was about Bond Street, but it has a massive knock-on effect."

The jeweller elaborated on the broader economic impact, explaining how luxury shopping can influence various aspects of tourism, from hotel stays to theatre visits. She suggested that Rachel Reeves, in her role as Shadow Chancellor, should consider reinstating tax-free shopping to stimulate economic growth.

McDonough's business, established in 1985, has become one of Britain's most successful high-end jewellery brands. Operating from a boutique in London's Sloane Square, her creations have adorned members of the royal family, including Princess Diana, Queen Camilla, and the Princess of Wales.

The jeweller also expressed concern about the Labour Party's engagement with small and medium-sized enterprises, advocating for reduced bureaucracy to foster entrepreneurship. She reflected on the business climate of the 1980s, stating, "When I set up my business in 1985 it was absolutely the most extraordinary atmosphere in this country."

In response to these concerns, a Treasury spokesperson acknowledged the economic challenges facing the UK, including a £22 billion deficit in public finances. The spokesperson indicated that decisions on addressing these issues would be made comprehensively in the upcoming Budget.

"It's [politicians'] job to talk to the young, the 25 year-olds who've left university who have got a brilliant idea. It's their job to get those people around a table and say 'what will help you?'"

As the debate over the 'Tourist Tax' continues, it remains to be seen how the government will balance the needs of the luxury sector with broader economic considerations in the coming months.