A jeweller worn by Kate Middleton, Queen Camilla and the late Princess Diana has cut her prices by 20pc in an attempt to counteract the so-called Tourist Tax.
Kiki McDonough, whose pieces can cost thousands of pounds, offered the discount to American and Australian shoppers over the summer in an effort to remedy the impact of removing VAT-free shopping for tourists in 2020.
The luxury industry is deeply unhappy about the move made by Rishi Sunak when he was Chancellor, arguing it has caused sales to drop and deterred wealthy foreign tourists from visiting London in the years that followed.
Ms McDonough said: “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].”
It comes after data last year showed a drop in the amount of money spent by American tourists in Britain but a rise in the amount they spent in France and Spain.
Ms McDonough said: “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.
“You can go to Bond Street and buy yourself a handbag, but then you might go to Edinburgh and see your friends, you’ll use transport, you’ll use cafes, bars, restaurants, come to London and go to the theatre – it sounds rather odd that that might stop because you couldn’t buy a handbag, but that is part of the treat of going somewhere.”
The Office for Budget Responsibility conducted a review of tax-free shopping for tourists earlier this year and concluded that its abolition would save the Exchequer about £540m in the next two years.
However, Ms McDonough said she believed Rachel Reeves should consider reinstating the perk given Labour is battling to inject growth into the economy.
She said: “I don’t think it’s something that’s high on their agenda, but it should be if they want growth in the economy, because it has this knock on effect, it isn’t just about one handbag.”
Ms McDonough founded her business in the 1980s and is now one of Britain’s most successful high-end jewellers. Today she runs the business from a boutique in London’s Sloane Square and sells to customers all over the world.
Her pieces can cost from several hundred pounds to many thousands for bespoke jewellery.
Over the years her customers have included celebrities and royals such as Princess Diana, who wore a pair of her earrings to a meeting with then-first lady Barbara Bush in the White House in 1990. Queen Camilla and the Princess of Wales have also been pictured wearing her jewellery.
Ms McDonough said she was worried that Labour was not spending enough time talking to smaller- and medium-sized businesses when compared to larger players.
She argued that the Government should reduce the burden of red tape to make it easier for younger people to start and grow businesses.
Ms McDonough said: “I think the young are still pretty fearless. What I think the Government could do is create more of an atmosphere in the country, which is ‘come on, everyone, fly by the seat of your pants, we’re behind you’.
“I think the more bureaucratic a country becomes, the more risk averse we become, because there’s always a law or something to stop us. When I set up my business in 1985 it was absolutely the most extraordinary atmosphere in this country.
“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?’”
A Treasury spokesman said: “Following the spending audit, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare and tax to fix the foundations of our economy and address the £22bn hole in the public finances left by the last Government. Decisions on how to do that will be taken at the Budget in the round.”
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