Group chief executive Joseph Wan warned that if after two years the Government’s new rules on non-domicile tax have affected business it would have to “expand our share of the market to the aspirational customer base to cover this shortfall”.
Wan said that the luxury department store chain would consider branching out from its high-end designer clothing offer to include brands at the “very fashionable end of high street fashion”, such as Banana Republic.
Other luxury retailers echoed Wan’s concerns. Harrods, Aquascutum and Liberty all voiced fears that the controversial change in tax laws could damage London’s booming luxury retail scene.
Wan said Harvey Nichols will gauge the effect of the new laws – which come into force in April – to assess if it needs to adapt its business model. “Successful businesses are always adapting to new environments,” he said.
The final package of tax changes has yet to be confirmed by Chancellor Alistair Darling, but non-doms will be charged an annual£30,000 levy to retain their status. Wan said this payment is not the key concern for many so much as “what they will suffer in terms of their assets, incomes and even family wealth”.
“People will be leaving this country. This will lead to a reduction in consumption,” he added.
Liberty chief executive Geoffroy de La Bourdonnaye shared Wan’s concerns. “If we saw an outflow of the wealthy international people, it would affect the luxury retail sector. I would be concerned if the equilibrium was disturbed,” he said.
Harrods managing director Michael Ward said: “The non-domicile tax could be quite material.” But he was hopeful that the UK lifestyle could persuade many to stay.
Aquascutum president and chief executive Kim Winser said: “If we don’t have so many people domiciled here, it’s going to affect many luxury retailers.”
The CBI has expressed concern that the Government is sending out signals that non-doms – who spend£16.6 billion in the UK each year – are no longer wanted in the UK. The Chancellor has already been forced to dilute his initial plans after the City warned of a brain-drain of talented professionals.