Luxury retailer Mulberry has warned that it is being put off building another factory in the UK because of the UK’s prohibitive tax structure.

Mulberry chairman and chief executive Godfrey Davis has called on the Government to reduce business taxes to make it easier for retailers to invest in manufacturing.

“We would love to make more in the UK but over the last 10 years the political and economic climate has not been conducive to investing in the UK,” said Davis.

He said the Government should encourage investment in the UK by focusing on reducing running costs by lowering taxes, rather than giving handouts for capital investments. “The Government needs to understand that it’s not about giving people money to set up factories, but about changing the tax structure,” he said.

Retailers have warned the Government about the increasing costs of doing business in this country, with looming business rates rises and other costs such as increasing National Insurance contributions. Some retailers, such as Kingfisher, have mulled moving their headquarters abroad for tax reasons.

Mulberry already has a factory in Somerset, where it produces 30% of its handbags, and has increased its production capacity there by 30% in the last year. Davis said that with full price sales still increasing Mulberry needs more capacity and is looking at a new factory in the UK.

“With the growth, it’s been very difficult to keep up with the pace,” Davis said, adding that the retailer found it challenging to keep up with consumer demand for the company’s leather handbags.

As well as its factory in Somerset, Mulberry also manufactures in Spain and Turkey. In October Mulberry revealed like-for-like retail sales were up 29% in the six months to September 30. Pre-tax profits surged 207% to £4.7m.