Mohit Lal: Come buy with me – Let’s onshore the benefits of duty-free shopping

10 May

Mohit Lal is Chairman & CEO of Pernod Ricard Global Travel Retail. This is a sponsored post by Pernod Ricard Global Travel Retail.

The careful reopening of international travel is a welcome step on the road back to normality. It’s also a valuable reminder that Global Britain is not just about the work of diplomats and top business executives – it is also built on Britons’ openness to the world and the conviviality that travel experiences bring to our lives.

In a normal year, a greater proportion of Britons travel abroad than almost any other nationality. European destinations are particularly keen to welcome Brits back, as friends and as lucrative customers. And while much of the debate has focused on holidaymakers, or reuniting us with loved ones abroad, international travel is also key to the livelihoods of many people at home.

The travel industry supports almost one million jobs and generates £8.5 billion for the economy. Beyond airlines and hotels, Britain’s airports and airport retailers are significant employers in their own right.

While many sectors face challenges to get back on their feet, the travel industry has been more severely impacted by Covid-19 than almost any other. With the number of flights at less than 10 per cent of normal levels, footfall and revenues have plunged to negligible levels.

Travel retail will play an integral role in the recovery of the travel ecosystem; it supports the financial viability of airports in every region and every nation of the UK, helping to protect our international connectivity. Shopping revenue represents up to 40 per cent of the income for our airports, helping to pay for infrastructure and keeping ticket prices lower, whether we’re flying from Cardiff.

Our duty-free halls are also an invaluable showcase for British produce – duty-free sales are the number one market for Scotch whisky worldwide, representing 22 per cent of the market for high value Scotch.

When travellers get back to UK airports, they will notice they can benefit from duty-free shopping when flying to EU destinations. This is a welcome reform that will benefit 72 million passengers annually.

The UK Government has also increased in-bound duty-free allowances on wine, beer and spirits, meaning passengers travelling to the UK can buy up to four litres of spirits duty-free. This is one of the most generous allowances in the world, and a testament to the Government’s efforts to liberalise trade.

While this is a boon for travellers, it is not – as it stands – as much of a boost as it could be for the UK economy and British jobs. The reforms mean someone flying from Paris, Dublin, Berlin or New York can buy four litres of spirits duty-free on departure and bring it back duty free to the UK, but they cannot currently buy any alcohol duty free on arrival in the UK. This places UK airports at a significant commercial disadvantage.

Thankfully, there is an easy way for the Government to onshore the benefits of this policy. By amending the rules to allow UK arrivals stores, travellers could purchase four litres of Scotch whisky on landing in the UK, instead of giving their money to airports and retailers elsewhere. A total of 60 countries already have arrivals stores in place, from Norway to Russia. Indeed, our Commonwealth friends such as Australia, New Zealand and Singapore have had arrivals stores for many years. This policy change would also not require a full Act of Parliament, so it won’t disrupt the Government’s busy legislative agenda, or its ongoing response to the pandemic.

Our experience suggests arrivals stores could boost UK airport passenger spending by between 20 and 30 per cent, creating jobs and supporting our airport infrastructure. York Aviation estimates that for every one million passenger journeys, arrival stores generate 155 jobs, £14 million in gross value added, and over £5 million in tax revenue (through corporation tax and national insurance, for instance). And on a practical level, it would make it easier for Britons and visitors to transport glass bottles at a time when airlines are continuing to crack down on on-board luggage allowances, and allow for lighter aircraft loadings and lower fuel requirements and carbon emissions.

The Government has already shown a willingness to innovate on duty-free shopping. By going a little further, we can secure more business for Britain’s airports, more sales for British producers, and ultimately more British jobs. This would be a win for consumers and would help the UK economy and our regional airports to really take off after Covid-19.