Electricals retailer Dixons Carphone has decided to close its airport stores business, just months after a scheme allowing VAT-free shopping for overseas tourists was scrapped.
The stores will be the first major casualty of the post-Brexit “tourist tax”, which was bitterly fought by retailers, hospitality and other tourism-dependent businesses.
Experts today said the 35 Dixons Travel stores would be the first of many closures, triggering tens of thousands of job losses. In London, there are eight Dixons Travel outlets at Heathrow and four at Gatwick.
The company said: “We do not expect passenger numbers to recover sufficiently to compensate for the removal of airside tax-free shopping by the UK Government from 1 January. This has led to the difficult decision to close this business, which historically made an annual profit contribution of over £20 million.”
Impacted employees will be offered roles elsewhere in the company.
Tom Ironside, director of regulation at the British Retail Consortium, said: “The BRC warned that the decision to scrap this relief would cost shops and jobs... Ongoing closures of airport shops shows the very real implications of the Government’s decision, and we strongly urge them to reverse it.”
Paul Barnes, chief executive of the Association of International Retail, said: “Ending tax free shopping puts over £3 billion of international visitor spend at risk each year as high-spending travellers divert their shopping to Paris or Milan.”
Professor Douglas McWilliams, whose CEBR economics consultancy did a major report on the costs to the UK of ending duty free, said: “I’m afraid this will be the first of many.
“If you are selling high value goods that you can buy elsewhere — such as consumer electronics and watches — airside shopping is less attractive.”
A judicial review of the duty free decision by the Treasury is expected to come up with a ruling soon, possibly as early as this week.
At issue is whether the Treasury acted “irrationally” in making the move. If it is found to have been irrational, a full judicial review will proceed that could overturn the whole duty free abolition.
The Treasury decision ended beneficial duty free rates for airside shopping at airports and for tourists buying goods in UK shops.
The Government presented the move as a “levelling up” move to close a loophole that had favoured wealthy foreign tourists and London. However, it is likely to hit tourist-dependent shops in Edinburgh, Manchester and other destination cities. Designer outlet parks such as Bicester Village, said to be as big a draw for Chinese tourists as the British Museum, will also be hard hit.
CEBR research estimated that 1.1 million fewer non-EU tourists would come to the UK, costing the economy up to £2.8 billion a year.
FTSE 250 company Dixons Carphone also gave a wider business update. The firm, which trades as Currys PC World in the UK and Ireland, online growth has been strong, with sales more than doubling to £4.5 billion for the year.
UK and Ireland comparable sales growth rose 11% in the 25 weeks to April 24 and 13% in the 51 weeks to April 24.
The firm, which was created through a £3.6 billion merger between Dixons Retail and Carphone Warehouse in 2014, had shops closed for most of the period due to the latest national lockdown. It was able to reopen shops in England from April 12.
Dixons Carphone, which is led by Alex Baldock, said that given the strong financial position, it repaid £73 million of furlough money.
Regarding the latest closures, a Gatwick Airport spokesman said: “We are saddened to hear about the closure of the Dixons Travel stores at the airport, particularly for any staff who will be impacted. Despite the difficult period the airport and our retailers have been through during the Covid-19 pandemic, Gatwick has a positive future and is in a strong position to restart as soon as demand returns and the public health situation improves.”
A HM Treasury spokesman said: “The Government recognises the challenging circumstances facing the travel sector as a result of the global pandemic, which is why we have provided an unprecedented package of support, including schemes to raise capital, flexibilities with tax liabilities, and the extended furlough scheme.”
“We have also extended duty-free sales of alcohol and tobacco to EU-bound passengers for the first time in over 20 years, providing a significant boost to airports and international rail terminals.”