The source of Bicester Village’s bitter VAT pill? Brexit
No 11 is scrapping a key tax break that gives foreign tourists rebates.
Rows of Audis, BMWs and Range Rovers filled the car park outside Bicester Village last Wednesday afternoon. Inside, shoppers were waiting to be ushered into Gucci’s glittering emporium, and the lunchtime queues at Pret A Manger were five deep.
Britain’s pre-eminent discount retail destination is still drawing crowds that the average shopping centre landlord would kill for. The only problem? The visitors’ accents bear the stamp of Birmingham and London rather than Beijing.
Only Buckingham Palace is a bigger draw for Chinese tourists than Bicester Village, a twee, faux high street awash with discounted luxury fashion. Yet its owners fear the government is pulling the rug out from beneath them.
At the end of the year, the government will abolish the VAT retail export scheme, which allows visitors from outside the EU to claim a 20% refund on goods bought here.
The Treasury expects to claw back £500m as a result — but it could be the death knell for retailers and restaurants already starved of tourists.The Centre for Economics and Business Research (CEBR) has forecast that the move could ultimately cost the Treasury £3.5bn.
“We were around for the ‘tech wreck’, we were around for the financial crisis, and through both of those, spending at our centres grew — but this is different,” said James Lambert, deputy chairman of Value Retail, co-owner of Bicester Village. “We expect there to be a substantial defection of Bicester customers to Europe if this goes through.”
Lambert’s peers at Selfridges, Harvey Nichols and Marks & Spencer have also called for the Treasury to reconsider. It would have a big impact on London’s West End, particularly Bond Street.
With Brexit approaching, the Treasury had to choose between extending the scheme to EU residents, which it estimated would cost up to £1.4bn a year, or axing it to comply with World Trade Organisation rules. It said that fewer than 10% of non-EU visitors used the scheme and that retailers could still offer tax-free shopping on goods shipped to visitors’ homes.Bicester Village is the creation of Scott Malkin, an American real estate heir whose family once owned the Empire State Building. To broaden its appeal beyond bargain-hungry Brits, Value Retail, the company Malkin founded, partnered with tour operators and laid on special discounts to lure tourists to the site in Oxfordshire.
As they came, the brands followed — and Bicester became the template for a further 10 “villages” in Europe and China, valued at £5.4bn. Last year, 7.3 million shoppers visited Bicester Village, roughly 70% of them tourists. Hammerson, which owns Birmingham’s Bullring centre, holds a 50% stake, but has little involvement in day-to-day operations. “It’s the ultimate retail experience in the UK. They could probably let it 30 times over,” said Sam Foyle, of property agency Savills.
Value Retail could not be accused of being an absentee landlord. To ensure its staff chat with tenants every day, they are not provided with a head office. It lets shops on short leases so it can chop and change tenants, and links rents to their turnover — a model that high street chains are now forcing on landlords.
For brands, the centre has gone from being a dumping ground for unsold stock to a way of reaching less affluent customers and turning them into devotees. These days, retailers re-order last season’s best-sellers and slip in some of their new collection at full price. Sales per sq ft can be triple that of central London.
This approach can cause friction, though. One tenant said: “They demand store upgrades each year and if they think the manager isn’t up to it, they’ll ask you to change them.”
While some tenants have bounced back, others say footfall and sales have more than halved. That makes the end of tax-free shopping, which accounted for about a quarter of sales across Value Retail’s luxury outlets last year, all the more galling.
The CEBR has forecast that the move will see UK tourist spending drop by between £1.1bn and £1.8bn, with the loss of up to 41,000 jobs.
Before the pandemic, so many Chinese tourists packed on to Bicester-bound trains from London’s Marylebone that platform announcements were made in Mandarin. Last Wednesday, the waiting room at Bicester Village station was deserted. If tourists don’t return for old-fashioned retail therapy, its boom times may be gone for good.
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