What we'd like to see in tomorrow's Spring budget for fashion and textiles
Image from a recent Ethics and Sustainability in Fashion APPG meeting with chair John McNally MP speaking.
by Meg Pirie
Tomorrow marks the announcement of the Spring Budget and what many anticipate to be the last fiscal event before the general election, which we’re pegging for Autumn. As such, this might be the final opportunity for the Conservatives to set policies prior to an election.
After collating both qualitative and quantitative data over recent months, in time to share our Sector Vision in Parliament, we have been advocating for a number of sector recommendations which we have presented cross-party.
Our recommendations encompass many facets of the sector from farming through to academia and are focused on the long-term, however there are two recommendations that we’d like to see taken up immediately in tomorrow’s budget.
The reinstating of the VAT Retail Export Scheme with an estimated economy boost of £11 billion a year according to current data.
On the 31st December 2020, the UK ended its tax-free shopping schemes for non-EU visitors and did not extend the schemes to EU visitors after the UK left the EU. With the cost-of-living crisis and lack of overseas visitors, due to the VAT Retail Export Scheme, the UK is being overlooked and places such as Paris are now being chosen to open Flagship stores, leaving the UK lagging behind in its ability to create a competitive marketplace. One such casualty is British accessory business, Mulberry, who closed its iconic Bond Street store after 27 years, citing the abolition of the VAT-free shopping scheme.
Data supplied in a recent roundtable by Sylvie Freund-Pickavance who is the Global Strategy and Business Development Director at Value Retail / The Bicester Collection highlighted that this is a key opportunity for luxury fashion in the UK as this will help the segment by reinstating the VAT res offer to non-EU tourists and extending it to EU tourists.
Sylvie highlighted that the luxury sector in the UK was worth £48bn to the economy in 2019, and 156,000 direct jobs.
Sylvie highlighted that the GDP in 2023 could have been £11.1bn higher according to a CEBR Jan 2024 study.
Recommendation:
The Government should back down on its refusal to reinstate VAT-free shopping for international tourists.
Tax Incentives for Sustainable Businesses
The scope for incentivising businesses to onshore their production and manufacturing in the UK, while simultaneously combining this opportunity with the Government’s ambitions to drive innovation and the UK towards net zero, and more environmentally visionary objectives, is extremely compelling. It would provide the UK with a tangible opportunity to show real global leadership post COP26. The UK excels at green tech innovation and sustainability. Adding incentives to support this will boost opportunities for inward investment, growth and support the levelling up agenda across the country.
The European Clothing Action Plan (ECAP) released a report in 2017 aimed at creating a circular approach to the procurement of workwear. The report showed that in 2015 across Europe there was over €8.6 billion of public sector textile and workwear procurement, equivalent to around 93,000 tonnes of workwear consumption. The report suggested that economic incentives such as lower Value Added Tax (VAT) rates were seen as a progressive form of fiscal incentives and when combined with Extended Producer Responsibility (EPR) policies, had the ability to extend as an instrument to encourage greater uptake of greater circularity through stewardship, particularly in closed-loop systems. France and the Netherlands had particularly good uptakes of public procurement in this space.
The UK’s film industry has previously benefited from the Government’s decision to offer tax incentives for productions making all, or a part of their film production here. In 2019, the tax relief-supported screen sectors resulted in £13.48bn in GVA) for the UK economy and generated 156,030 full-time equivalent (FTE) jobs. Primarily because of this, we have seen on-going inward investment, with key global players choosing the UK to headquarter their operations and build new studios, employing a wealth of workers. Incentives clearly work and given the scope for the UK to lead on the global drive toward sustainability and green innovation, we hope that the Government will look closely at these opportunities and appreciate this is a tangible and lucrative opportunity.
Further, Sweden has introduced a VAT reduction from 25% to 12% on the repair of goods, including clothes, to stimulate the repair industry and reduce the amount of waste. In July 2021, the EU imposed a border VAT applicable to all goods imported to the EU. Implications could include a reduction in consumption of fast fashion products that are produced abroad where environmental and labour regulations are more lax.
Recommendation:
Tax incentives for B Corps and companies with proven positive social and environmental contributions who commit to manufacture in the UK (c.f. The tax incentives enjoyed by HETV and film who make scripted productions in the UK).