The impact of the 14-day quarantine on the UK luxury industry
Jul 1, 2020
Tourists and foreign shoppers are likely to avoid coming to the UK, where the government-imposed 14-day quarantine means anyone arriving will not be allowed to leave the place they are staying for this duration.
The U.K.’s luxury sector, along with many brands and retailers, is concerned of the impact the quarantine will have on recovering from months of store closures and negative sales. The 48 billion pound luxury industry has been one of the hardest hit, as the pandemic continues to have a huge economic and psychological impact, with consumer sentiment severely dampened, and the purchasing of large ticket items greatly affected.
Walpole, the sector body for the British luxury industry, has written an open letter to the Chancellor, citing tourism and international visitors as a crucial driver for revenue. Walpole represents more than 250 member companies from the high-end creative and cultural industries with members spanning brands including Alexander McQueen, Burberry, Harrods, Net-a-Porter and numerous small and medium-sized fashion businesses, such as Ettinger and Temperley London.
Impact of Covid-19 on luxury
Prior to the Covid-19 lockdown, the luxury sector was growing at 9.6 percent annually, outpacing UK annual growth of 4 percent. The pandemic has caused on average a 60 percent decline over the first 6 months of the year and it faces grave economic consequences unless all potential economic levers are used to support a return to growth. International tourism must be encouraged, the letter says. The quarantine regime is harming the tourist industry and the many inter-related sectors which contribute to the British creative economy.
Tax Free Shopping data released by Global Blue shows the world’s wealthiest shoppers account for 17 percent of global tax free spend. These international elite shoppers come from Greater China (40 percent), Southeast Asia (15 percent), Gulf Countries (14 percent), USA (6 percent) and Russia (6 percent).
France is currently the number one retail destination, followed by the UK and Italy. As the UK aims to ‘Build back Better’ it must signal that the UK is open for business to overseas customers and retain its competitive edge with the rest of Europe. Now that borders are mostly open within the Schengen countries, the UK has already a competitive disadvantage which will be compounded by not being open to travelers from the five wealthiest shopping nations.
Data released by Global Blue on 24 June, shows that Tax Free Shoppers are currently more likely to travel to APAC destinations and Germany based on perceptions of the territories’ safety. APAC countries have established green corridors for travellers and because of this are set for economic recovery faster than Europe.
“The international appeal of British luxury brands, hotels, restaurants and cultural experiences are highly influential in attracting visitors to the UK and our soft power. We must continue to build on that appeal and do everything to support it. Whilst online luxury sales have been a critical life support throughout the crisis in the domestic market - and loyal local shoppers are undeniably important - the British luxury sector’s appeal will dwindle if overseas customers are not given the opportunity to visit the UK for the full brand experience which is particularly important for customers from international markets. Long-haul travellers must be encouraged to the UK.” – Helen Brocklebank, Chief Executive, Walpole.
“Prior to the current crisis, British luxury has been a global success story with London recognised as being the world’s leading luxury goods capital and the benefit of that global shop window spreading out across the country by nature of the tourism flows but also the regional manufacturing and employment supported by brands including Burberry (S.Yorks), Bentley (Crewe) Gleneagles, (Perthshire) and Mulberry (Somerset) . The British luxury market bolsters the UK economy, supports regional growth and employment and significantly bolsters the British brand.”
“It is estimated that luxury global sales will fall by 35 percent this year (Bain & Co) but this is largely an optimistic outlook and does not fully recognise the impact on smaller players - who are yet to internationalise and are reliant on revenues in the UK from domestic and tourist spend. The UK must do everything possible to support luxury UK sales in order to retain its position in the global market place.”
“The 14-day quarantine rules which affect international visitors, particularly elite and long-haul shoppers, will hinder the return to growth of the UK’s luxury goods sector. They need to be reviewed urgently and the effect on the luxury market and in turn the wider UK economy and jobs considered.”
Image Burberry campaign via Walpole