Sunak challenged over ‘spectacular own goal’ of VAT rule post-Brexit

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Rishi Sunak was challenged by the chairman of Burberry over the “spectacular own goal” of a post-Brexit VAT change as the Prime Minister sought to repair the Conservatives’ reputation with business.

Gerry Murphy told the Prime Minister on Monday that his move to scrap the VAT refund for tourists has made Britain the “least attractive” shopping destination in Europe.

Mr Sunak insisted to around 200 high-profile chief executives assembled at a Business Connect conference he convened in London that the Government has “got your back”.

Mr Murphy welcomed Mr Sunak as being “obviously more business friendly than some predecessor administrations”.

But the chairman of the luxury retailer added: “It is somewhat perverse that on the day that we left the single market, a decision by, I think it was by you as chancellor, to remove the VAT refund for tourists made the UK the least attractive shopping destination in Europe.

“Leaving the EU has had a significant friction effect on trade, hopefully not forever … but it is the case it was a drag on growth.

“So we ask you to look at this specific one (VAT), this is a spectacular own goal, one that can be reversed by a decision from you or from the Chancellor.”

Mr Sunak insisted there “were good reasons for it” but said he would look at the data to “see if things are panning out as we expected to, or not”.

Opening his speech, he had told the crowd that ministers are focused on driving up skills in Britain and boosting growth while developing a migration system to attract talent.

“We want businesses small and large to know that this Government has got your back,” Mr Sunak said.

Business Connect event – London
Prime Minister Rishi Sunak during the Business Connect event in North London (Daniel Leal/PA)

The Chancellor told reporters at the conference: “We had a very bumpy period politically last year.

“I think if you talk to the executives here today, a massive cross section of the business community, what they say is that that stability has come back.

“We see all sorts of signs of increasing optimism.”

Mr Hunt conceded that the tax burden “is too high”, but argued that “the way we will bring the tax burden down is by growth”.

“That’s why it matters that global chief executives say we’re the third most exciting country to grow business in,” he said, pointing to the importance of “education, enterprise, everywhere and employment” in achieving growth.

Business Connect event – London
Chancellor Jeremy Hunt listens to Rishi Sunak’s speech at the Business Connect event (Daniel Leal/PA)

Shadow chief secretary to the Treasury Pat McFadden said: “After 13 years, the pattern of Tory economic failure is grinding on.

“Families in Britain are being harder hit by price rises than many comparable economies.

“Other countries have had to cope with Covid and the consequences of the war in Ukraine, yet it is Tory Britain which sits at the top of the inflation growth league of major industrial economies.”

Earlier this month, IMF economists stated that they expected the UK economy to grow slower than other developed G7 nations, with a contraction of 0.3% this year before rebounding to grow by 1% next year.

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