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What does the Spring Budget 2024 mean for fashion and luxury businesses?

The Spring Budget 2024 was presented on 6 March 2024, but what does it mean for the retail sector, and in particular, fashion and luxury businesses?  

The current state of the economy

The report’s executive summary touched on various aspects of the UK economy; the first being inflation which it confirms has “more than halved from its recent peak”. Lower inflation is key to consumer spending, as it increases their purchasing power and disposable income. At a recent retail sector update hosted by BDO, the speakers commented on the sustained decline in consumer spending in discretionary categories, so it is possible that lower inflation could help reverse this trend and improve the outlook for fashion and luxury businesses. 

Key takeaways from the Budget

  • No re-instatement of VAT-free shopping 

Fashion and luxury businesses were hoping for the re-introduction of “VAT-free” shopping, which allowed international tourists to claim back the value-added tax on items purchased during their visit. The scheme was seen to be hugely beneficial to luxury brands, encouraging tourist purchases, but was brought to an end in 2021. British luxury brand Mulberry has been vocal on the impact of this, stating that the removal of VAT-free shopping contributed to the decision to close its Bond Street store last year. 

The Office for Budget Responsibility (OBR), in its report released on Budget Day, stated that reintroducing VAT-free shopping “is unlikely to affect significantly the productive capacity of the economy”. The Budget acknowledged the report by the OBR and said it would consider the OBR’s findings alongside industry representations and broader data. It also said it welcomed “any further submissions in response to the OBR’s findings”. 

  • Empty property relief and the impact on pop-up shops

As it currently stands, landlords may be able to claim “empty property relief” (making them exempt from business rates) for empty retail property, such as shops, for a continuous period of up to three months. If there is a short-term let during this period of up to six weeks or less, the business rate exemption will not “reset”. This prevents owners from gaining additional periods of rates exemption by establishing a temporary letting i.e. you cannot claim three month exemption, have a tenant for six weeks or less, and then claim another three month exemption once they vacate. 

The Budget announced that the Empty Property Relief “reset period” will be extended from six weeks to 13 weeks from 1 April 2024 in England. This means a property must have been occupied for at least 13 weeks before any new period of empty relief applies; and 13 weeks is often much longer than the usual pop-up shop. Therefore, landlords are less likely to accept any short-term lets of less than 13 weeks, or risk not being able to claim the empty property relief once the tenant vacates. 

In a publication by Drapers, Vivienne King, chair of the Shopkeepers' Campaign, which calls for reforms and reduction in business rates, is “deeply concerned” about the decision saying it “will bring down the curtain on pop-up shops”. 

In summary, therefore, the Chancellor took a rain check this Spring on substantive help for the fashion and luxury sector – but perhaps an improving economic outlook may result in some green shoots nonetheless.


fashion and luxury, retail, real estate