LONDON — It’s the summer season in the British capital and the city is positively buzzing. With Royal Ascot, Glastonbury and the Serpentine Summer Party in June, and then sold-out concerts by Bruce Springsteen, Blackpink and Lana del Rey in Hyde Park, the Formula 1 British Grand Prix in Silverstone last weekend and Wimbledon moving into its final rounds this weekend, it really feels like 2019 all over again.
It’s almost enough to distract from the fact that the UK economy is still in the doldrums, dragged down by Brexit and still suffering from a post-Covid hangover:
- Economic growth is anemic. While Britain has thus far avoided a recession, the economy is smaller now than it was before the pandemic. On Thursday, the Office for National Statistics (ONS) said the UK economy has “shown no growth” in three months. Of the rich G7 countries, only Germany is doing as badly.
- Inflation remains stubbornly high. While overall inflation in the US dropped to 3 percent in June 2023, UK inflation in May was still a staggering 8.7 percent. At this rate, prime minister Rishi Sunak’s commitment to cut inflation in half by the end of the year looks very challenging.
- The housing market is in crisis. According to Halifax, UK house prices declined by 2.6 percent in June versus last year, the fastest drop in 12 years. Meanwhile, rents are soaring, further exacerbating the cost of living crisis.
The downbeat economy is making life miserable for millions of lower-income people who are bearing the brunt of the damage.
And then there is tourism to the UK — a key driver for the British fashion industry — which is still below 2019 levels. According to VisitBritain, 35.1 million people will visit the UK this year, down 14 percent from 2019. In Spain, one of the most visited countries in the world, tourism arrivals in May 2023 were 3.8 percent above 2019 levels.
One key factor in UK tourism’s malaise is the lack of Chinese visitors. According to new analysis by BoF Insights, Chinese customers are traveling again, but most are staying close to home. (Our survey says Japan is currently their number one international destination.)
Another factor is the lack of VAT refunds. Previously, non-residents were able to reclaim the 20 percent sales tax on fashion and apparel purchases. Especially for Chinese tourists who are making their way back to Europe, without VAT refunds, the UK is a much less appealing destination than France or Italy.
The one major exception to lower tourist flows to Britain is wealthy Americans. Last year 4.5 million Americans traveled to the UK, up 2 percent from 2019. Americans are also staying longer and spent a record $7.45 billion in 2022, up 42 percent from 2019.
I got a first-hand taste of the uptick in wealthy Americans traveling to London at Twenty-Two, the new-ish private members club in Mayfair where on Monday, investor and former Hollywood super agent Michael Kives hosted a dinner attracting a who’s who of Hollywood and American business elite. From the singer Katy Perry and her partner, actor Orlando Bloom, to David Bernard, the producer of hit television show “White Lotus” and Darnell Storm of the United Talent Agency, it was like Los Angeles had been transplanted to London.
How do you pull that kind of crowd on a Monday night? Well, first you have to be exceptionally well connected. But what made it easier was that many of the guests had already been in Europe for several weeks — attending the Cannes Lions Festival, fashion weeks in Milan and Paris, or the Brilliant Minds Festival in Stockholm — using London as their base because it is so easy with a shared language and history.
It’s the same reason so many fashion and beauty brands are choosing to expand into the UK market, despite the flailing economy, as our London-based luxury correspondent Tamison O’Connor reported this week.
“Even if the UK economy is stuck in a rut, it retains an allure for international brands looking for their next market to conquer,” she wrote. “It’s the biggest predominantly English-speaking economy after the US. It’s a sizeable market for fashion and beauty. Its wealthiest shoppers are concentrated in London, also a global tourism destination.”
Here are more top picks from our analysis on fashion, luxury and beauty:
1. What Chinese Luxury Customers Want — With the relaxation of China’s zero-Covid policies beginning in late 2022, global brands and retailers have been eagerly preparing for the return of Chinese travelers. They will be waiting a while longer. BoF Insights’ latest report, Dynamic Journeys: China’s Luxury Shoppers at Home and Abroadunpacks travel sentiments, luxury shopping preferences and behaviors and guidance for luxury players in an evolving market landscape.
2. Can Fashion Ever Be Truly Sustainable? — A flurry of news this week highlighted just how complicated creating a more sustainable fashion industry is. While Inditex promoted its climate ambitions, industry watchdogs highlighted the limitations of these kinds of declarations in the annual Fashion Transparency Index. While Chanel re-upped its investment in traceability business Origin as part of a $57 million fundraising, BoF’s new sustainability columnist Ken Pucker examined why mushroom leather failed to scale.
3. Will Switzerland’s Third-Largest Watch Brand Continue To Rise? — Omega’s sales have recovered and surpassed pre-Covid levels, CEO Raynald Aeschlimann said to Robin Swithinbank this week. But aggressive price hikes, step-and-repeat marketing and an authenticity scandal could challenge the Swatch-owned brand’s ascent.
4. The Business of Being Kim Kardashian —Kim Kardashian is reportedly buying back Coty’s stake in her beauty business while Skims is looking to close a pre-IPO round at a valuation of $4 billion. All in a week’s work for Kim K, plus an appearance at the D&G Alta Moda festivities in Puglia, wearing a mind-bogglingly beautiful white gold necklace and “Rubellite” tourmaline with an aubergine taffeta dress. Rachel Strugatz has the inside scoop on why a buyback from Coty might be happening.
5. How Fashion Entered The Formula One Race — On Sunday at the British Grand Prix in Silverstone, Tommy Hilfiger the brand flexed its relationship with Mercedes and Brad Pitt and Damson Iris made an appearance as part of a new film being co-produced by F1 rockstar Lewis Hamilton and Mr Hilfiger himself. F1, with its annual calendar of races throughout the year and the success of the Netflix docuseries “Drive to Survive” is entering mainstream pop culture. As Palm Angels’ founder Francesco Ragazzi told Daniel-Yaw Miller“It’s like having a Super Bowl every weekend.”
The BOF Podcast
Earlier this year, I had the pleasure of sitting next to the menswear designer Oliver Spencer at a dinner he hosted in London. It’s always great to get to know the person behind a brand, and that was especially true with Oliver as he is a great story teller — and has incredible stories to tell. Most of all, he has done that rare thing: to build a profitable, independent fashion brand.
“Small is beautiful. You have to have a certain amount of business turnover to get to these levels, but you don’t need hundreds of millions [of dollars] to run a profitable brand,” says Oliver.
this week on The BOF PodcastI sit down with Oliver to hear his amazing personal journey from a market stall in Portobello Road to running two independent menswear businesses and then having to adapt to post-pandemic lifestyle changes.
Ask Me Anything!
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Have a nice weekend, everyone.
Imran Amed, Founder, CEO and Editor-in-Chief, The Business of Fashion
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