Prime Minister Rishi Sunak has been challenged by the chairman of Burberry over the scrapping of VAT refunds for tourists.

Gerry Murphy, who heads the luxury retailer, said the “spectacular own goal” had made Britain the “least attractive” shopping destination in Europe.

The conversation took place at a Business Connect conference, which saw around 200 high-profile chief executives given the opportunity to question the prime minister.

Mr Murphy began by describing Mr Sunak as “obviously more business-friendly than some predecessor administrations”.

Then he said: “It is somewhat perverse that on the day that we left the single market, a decision by, I think it was by you as chancellor, to remove the VAT refund for tourists made the UK the least attractive shopping destination in Europe.

“Leaving the EU has had a significant friction effect on trade, hopefully not forever… but it is the case it was a drag on growth.

“So we ask you to look at this specific one [VAT], this is a spectacular own goal, one that can be reversed by a decision from you or from the chancellor.”

Mr Murphy said the decision did not just affect the luxury industry but also travel, hotels, airlines and airports, adding: “We are actively exporting business as a result of that policy to our continental competitors”.

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Mr Sunak came to the London event hoping to patch up relations with the business community, after the challenges and problems of Brexit, coronavirus, and the leadership of Boris Johnson and then Liz Truss.

He had said earlier in the conference: “We want businesses small and large to know that this government has got your back.”

Answering Mr Murphy, he declined to discuss tax policy in an open forum but said there were “good reasons” for the VAT change.

He promised to look at the data to “see if things are panning out as we expected or not”, adding: “We take this very seriously, we are here to listen and engage.”

Labour’s shadow chief secretary to the treasury Pat McFadden said: “After 13 years, the pattern of Tory economic failure is grinding on.

“Families in Britain are being harder hit by price rises than many comparable economies.

“Other countries have had to cope with COVID and the consequences of the war in Ukraine, yet it is Tory Britain which sits at the top of the inflation growth league of major industrial economies.”

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