Kiki McDonough, the jeweller favoured by Princess Diana, Kate Middleton, and Queen Camilla, has slashed prices by 20% in a bid to offset the effects of the so-called “tourist tax”.

This summer, McDonough offered the discount to American and Australian shoppers, aiming to alleviate the impact of the 2020 removal of VAT-free shopping for tourists, a move introduced by then-Chancellor Rishi Sunak.

The luxury industry has been vocal about the negative impact of the policy, with McDonough noting a significant drop in American tourists, who form her second-largest market. The 20% discount helped attract foreign customers back to her boutique in London’s Sloane Square. “It’s amazing how many people were then brought back [with the discount],” she said.

The removal of VAT-free shopping has caused tourist spending to shift towards other European countries such as France and Spain, while the UK has seen a decline. McDonough argues that luxury shopping is an essential draw for tourists, with wider economic benefits. “Luxury is not seen as important in this country,” she said, highlighting the ripple effect it has on other sectors, including hospitality and tourism.

While the Office for Budget Responsibility estimates that scrapping tax-free shopping will save £540 million over the next two years, McDonough believes Labour should reconsider reinstating the perk to boost economic growth. She emphasised that it is not just about luxury goods but the broader experience and spending associated with tourism.

McDonough, who founded her business in the 1980s, also expressed concerns about the government’s focus on large businesses at the expense of smaller enterprises like hers. She called for reduced red tape and more support for young entrepreneurs, urging politicians to foster an environment that encourages risk-taking and business growth.

A Treasury spokesperson reiterated that the government faces tough decisions in the upcoming budget, as it aims to address a £22 billion hole in the public finances left by the previous administration.

Read more:
Royal jeweller cuts prices by 20% to counter impact of tourist tax