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Burberry chair: loss of VAT refunds for tourists was ‘spectacular own goal’
Gerry Murphy, chairman of fashion group Burberry, criticises Rishi Sunak for his decision, as chancellor, to remove tax-free shopping for tourists.
Murphy begins by thanking Sunak for holding today’s event, saying it’s great to see the government is more “business friendly” than some of its predecessors.
But he then warns that the “somewhat perverse” decision to remove VAT refunds, on the day Britain left the single market, has hurt the economy.
This has made the UK “the least attractive shopping destination in Europe,” Murphy tells the PM, at today’s Business Connect event.
Virtually every other major destination in Europe offers VAT refunds, he explains, and Burberry can see that the recovery from the Covid-19 pandemic in Paris, Milan and Munich is much stronger than in the UK.
We are actively exporting business as a result of that policy.
Murphy calls it a “bad decision, made for the right reasons”, and urges Sunak and chancellor Jeremy Hunt to rethink this “spectacular own-goal”.
Sunak replies that the governent is “here to listen” and will take Murphy’s comments away.
[Forbes explained last year that the government decision to withdraw the VAT Retail Export Scheme made Britain the only European country not to offer tax-free shopping to non-EU tourists, which, at the time, was argued by several parties to be a counter-productive move.]
Key events
Prezzo to close 46 loss-making restaurants putting 810 jobs at risk
Bad news: Italian restaurant group Prezzo is closing 46 UK restaurants, putting over 800 jobs at risk.
Prezzo said it had been hit hard by soaring costs and changes to customer habits, and that the closures, which will affect 810 workers.
It said the shake-up will impact a raft of sites where footfall is still below pre-pandemic levels and leave more restaurants in busier shopping destinations such as retail parks or tourist hot-spots.
Here is a full list of all the Prezzo restaurants due to close:
Phillip Inman
Over in Germany, the economic storm clouds appear to be lifting.
Germany’s most prominent indicator of business activity, the Ifo index, increased for the seventh consecutive month in April, edging up to 93.6 from 93.2 in March, my colleague Phillip Inman reports.
Business leaders reported that the current conditions were still historically weak after winter of soaring gas prices and a decline in trade with China, but the outlook was expected to improve dramatically during the rest of the spring and into the summer.
🇪🇺 IFO German Business Climate Index (24 Apr ‘23)
– German business sentiment slightly improves (+0.4%) rising to 93.6 for Apr ’23 (vs 93.2 Mar ’23)
– However, business expectations in the immediate term for manufacturing, services, trade and construction worsen pic.twitter.com/gOidcZpawJ
— Sophia (@SophiaKnowledge) April 24, 2023
A measure of business expectations increased from 91.0 to 92.2.
Several analysts said the rebound meant Berlin could avoid the downturn predicted earlier this month by the International Monetary Fund.
The Washington-based orgainisation said that Germany and the UK could expect to suffer mild recession, but more recent business surveys have shown activity has strengthened and a recession in both countries is unlikely.
Carsten Brzeski, global head of macroeconomics at ING said that while lower wholesale gas prices and the reopening of the Chinese economy have boosted economic confidence, “the German economy is still far away from strong growth”.
Speaking on Bloomberg TV, Ifo President Clemens Fuest, said:
“We will continue to see an economy which is neither collapsing nor growing dynamically.
“It’s a stagnating economy and the question is what could take the economy out of stagnation. Something that could achieve that would be further improvement in supply chains, and maybe a perspective for a settlement in the Ukraine war.”
The Ifo said the index average dating back to 2005 is 96.7. The index was regularly above 100 in the years from 2016 to 2018. It plunged to almost 70 in the month after the pandemic hit in February 2020 and below 80 when Russia invaded Ukraine.
European Central Bank officials have hinted that the resilient eurozone will need to undergo more interest rate rises to reduce inflation.
ECB governing council member, and Belgian central bank governor, Pierre Wunsch, told the Financial Times over the weekend that he “would not be surprised if we [the ECB] had to go to 4%,” from 3.5%.
He added:
“We are waiting for wage growth and core inflation to go down, along with headline inflation, before we can arrive at the point where we can pause.”
Morgan Stanley analyst Seth Carpenter said:
“In the euro area, we think that the ECB is also willing to accept a recession to bring inflation down.”
Brzeski added that a period of stagnation was likely to reassert itself later this year.
“Available hard data for the first two months of the year as well as recent soft indicators point to a surprising growth revival in the German economy. This growth revival is driven by a rebound in industrial activity, helped by the Chinese reopening and an easing of supply chain frictions.
“But this rebound is also very likely a short-lived one. At the same time, private consumption continues to suffer from still-high retail energy prices. Recent wage settlements, like last weekend’s agreement in the public sector, will offset the loss in purchasing power but only partly and only gradually.”
Helena Morrissey asks Sunak how the ‘horrible allegations’ about the behaviour of some CBI staff will affect efforts to improve diversity and inclusion in British industry.
Baroness Morrissey, a top City fund manager, says the allegations are the ‘elephant in the room’ today, and she is concerned that it could put women off joining industry, saying:
We need everyone to feel they’ll be respected and included if they join industry.
Sunak agrees that diversity and inclusion are really important, pointing out he has two daughters.
I want to make sure that they grow up in an economy, and a society where every opportunity is available for them
Sunak says the government asked Alison Rose (NatWest’s CEO) to conduct a review of female entrepreneurship a few years ago, which highlighted the barriers and proposed recommendations.
Sunak says the government is making progress on helping women create businesses, but isn’t there yet.
One problem (as he heard on his LinkedIn Live event) is that access to finance is harder for female entrepreneurs.
Network and mentorships are also important – not an easy thing for the government to fix, but he’s keen to work with businesses to help create networks and mentorship to support female leaders.
Sunak says:
We want to make sure that no matter what your background, no matter whether it’s whether you’re a woman or man, whether you’re from a different part of the country, whatever your socio-economic background is, that we want to spread opportunity around.
There’s so much talent in the country. And we’re missing out if we’re not giving everyone an opportunity to fulfil that potential.
Burberry chair: loss of VAT refunds for tourists was ‘spectacular own goal’
Gerry Murphy, chairman of fashion group Burberry, criticises Rishi Sunak for his decision, as chancellor, to remove tax-free shopping for tourists.
Murphy begins by thanking Sunak for holding today’s event, saying it’s great to see the government is more “business friendly” than some of its predecessors.
But he then warns that the “somewhat perverse” decision to remove VAT refunds, on the day Britain left the single market, has hurt the economy.
This has made the UK “the least attractive shopping destination in Europe,” Murphy tells the PM, at today’s Business Connect event.
Virtually every other major destination in Europe offers VAT refunds, he explains, and Burberry can see that the recovery from the Covid-19 pandemic in Paris, Milan and Munich is much stronger than in the UK.
We are actively exporting business as a result of that policy.
Murphy calls it a “bad decision, made for the right reasons”, and urges Sunak and chancellor Jeremy Hunt to rethink this “spectacular own-goal”.
Sunak replies that the governent is “here to listen” and will take Murphy’s comments away.
[Forbes explained last year that the government decision to withdraw the VAT Retail Export Scheme made Britain the only European country not to offer tax-free shopping to non-EU tourists, which, at the time, was argued by several parties to be a counter-productive move.]
Sunak: India is a massive market opportunity
Q: India is the fastest growing economy in the world right now, so what is the government doing to strengthen the UK-India corridor?
Sunak risks a joke, saying he’s trying to take more family holidays in India (his father-in-law founded Infosys, of course).
But more seriously… he agrees India represents a massive market opportunity – its growing middle class is a fantastic opportunity to UK consumer goods companies.
Sunak says trade secretary has been “hard at work” engaging with the Indian Government to try to make more progress on trade discussions (the two sides have been trying to reach a trade deal)
Sunak say he spoke to India’s prime minister, Narendra Modi, about it “just recently”;
We’re keen to see if we can make that work because of the obvious opportunity that it poses.
There are opportunies for closer trade in services, as well as goods, Sunak adds.
“That said, trade agreements everywhere are not easy,” Sunak adds, but…
Rest assured we’re at it at all levels of government. I’m talking to Prime Minister about it.
Sunak: UK must consider AI sovereign capability
Q: What is the UK’s strategy to address the rise of large language model (LLM) artificial intelligence, which are disrupting businesses? Does the country need a national capability, especially when considering issues like defence and data security?
Sunak says the government is announcing something today on this issue.
Sunak say AI has the potential to transform every aspect of our lives. But he agrees it’s important to consider the UK’s sovereign capability in artificial intelligence, and the AI ‘stack’ (the tools, services, and processes that fit together power AI).
Sunak says it’s right to consider….
What is our sovereign capability particularly as it relates to national security, but also all elements of the stack.
Computing power is also important – the UK committed £900m to exoscale computing in the budget.
And Sunak pledges the UK will make sure it can capitalise on the opportunities of AI and protect ourselves against the risks.
We’re imminently about to say something about exactly the point that you raised because it’s a really important one. But rest assured, we’re on it.
.@Improbableio CEO Herman Narula tells PM AI has “disrupted every aspect of my business and I thought we were a deep tech company”. PM says UK working on sovereign AI capabilities (more on this on the site later).
— Matt Gooding (@MattGoodingTM) April 24, 2023
Q: How can the UK government help startups accelerate their growth?
Sunak says this is a burning question – as the UK is brilliant at starting up businesses, with “phenomenal” founders, and research bases at our universities.
He says its important to have visa regime and migration regime, where the world’s best and brightest talent can come here easily – and cites the UK’s Scale-up Worker visa, for people who come to work at fast-growing UK businesses.
There’s also the new High Potential Individual (HPI) visa, which lets graduates from the world’s top 50 universities stay in the UK for at least 2 years.
Changing the culture of risk appetite is also important, Sunak adds.
Keith Anderson, chief executive of Scottish Power, takes the microphone… and challenges Sunak about UK investment.
Anderson says Scottish Power recently completed a £1.3bn investment in renewable power. (to fund 95 wind turbines at an offshore wind farm off the coast of Norfolk).
Anderson says he has another £10bn readyto go – but how do we ensure that money goes into the UK supply chain?
Sunak thanks him for the investment – saying the UK has the three largest offshore wind farms in the world.
The regulatory environment is key – Sunak cites the UK’s Contract for Difference pricing model which gives low-carbon companies a guaranteed return, and which has pushed down the cost of green energy.
The UK Infrastructure Bank can also help fill financing gaps, Sunak adds, to cut help carbon emissions in a way that creates jobs here at home.
Rishi Sunak says the UK must have a tax system that supports investment in film and TV production.
But skills matters too – Sunak says creative industries tell him they will keep investing in the UK, as long as we’re training the next generation of visual effects specialists or suchlike.
Sunak says he recently visited the London Screen Academy, a sixth-form academy in North London that’s training the next generation of workers in the film and television industries.
We need to make sure that we’re replicating institutions like that across the country.
Rishi Sunak has begun speaking to UK corporate chiefs at his Business Connect event in London.
He tells them the government is “unashamedly pro business”, and that both big and small firms should know that the government has “got their back”.
The UK is depending on businesses to create jobs and prosperity, Sunak explains.
Sunak says govt wants businesses small and large to know that the govt has “got your back”. Apparently 200 business leaders in the audience today who will be quizzing the PM shortly.
— Matt Gooding (@MattGoodingTM) April 24, 2023
The crisis at the CBI is creating a scramble to fill the void, now that the group is mothballed until it holds an emergency meeting to discuss its future in June.
WPI Strategy, a public affairs and strategic communications consultancy, is setting up a new body called BizUK which – it says – could play a temporary role ahead of the next election.
Nick Faith, WPI’s founder and a former communications director of the Conservative-linked Policy Exchange thinktank, told the Today Programme that it was hard for the CBI to act as a collective voice for industry to political parties, now that Labour has joined the government in suspending ties with the group.
Faith says:
That’s why we are establishing BizUK, because there is a clear gap for a collective independent voice to be able to make the case for midsize and larger businesses with political parties of all colour, in a period which is hugely important over the next 12 months.
Faith said there was now a “trust deficit” between the CBI and its members, who will not want to be associated with a “tarnished brand”.
Asked what BizUK’s top priority is, Faith replied that businesses need a stable environment for investment.
What businesses crave for is stability.
What we’re seeing now with the two main leading political parties is actually an acceptance and understanding that they want stability.
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