LONDON — After a summer rattled by rioting and looting following the murder of three young girls in Southport, England, British retailers and brands are headed for an uneasy fall with taxes, and the cost of doing business, set to soar.
British media outlets are warning of “ghoulish” tax hikes as the new Labour government pumps up public sector pay, and curries favor with the trade unions in a bid to end years of strikes.
Business leaders, already worried about the escalation of war in Ukraine and the Middle East, are concerned that the government’s sympathy for the unions, and drastic new laws aimed at protecting workers, will stifle economic growth and deter investment in the U.K.
Retail, especially high-end fashion and accessories, remains undaunted with London’s West End filling up; brands including Jacquemus making their debut, and hotels gearing up for a steady stream of tourists from the U.S., Europe and the Far East.
The Chinese continue to stay away, deterred by the cost of traveling to Europe and by the cancellation of tax-free shopping in the U.K., which the new, left-leaning government is unlikely to restore.
Union flags hanging high above Regent Street.
In Pictures via Getty Images
Commercial Real Estate “Unpredictable”
While the mood may be upbeat, the commercial real estate market remains “deeply unpredictable,” according to Joanna Lea, Mayfair Retail Portfolio director at Grosvenor, which owns prime retail property across London.
Lea described 2024 as a year of recovery after a challenging 2023, but also pointed out that doing deals right now is “like playing at Wimbledon, and not knowing where the balls are coming from.” Food and beverage businesses are flourishing, she said, and luxury brands are willing to wait for the right store space.
On Mayfair’s Mount Street, home to brands including Moynat, Balmain and Christian Louboutin, there has been a “flight to quality” with Grosvenor sometimes booking rents 25 to 30 percent higher than the offer price for the properties it owns.
Later this year, Goyard is set to expand a store on Mount Street, moving to number 103, while in mid-2025, the Richemont-owned Dunhill will open a new store on nearby Grosvenor Street, not far from the brand’s current flagship store at Bourdon House in Mayfair.
Richemont has been particularly acquisitive in London. According to industry sources, the luxury giant purchased the Boodles building at 178 New Bond Street in order to expand the Cartier shop, which sits next door.
Richemont declined to comment on the Dunhill move, and on Cartier’s expansion plans.
A look at Dunhill’s fall 2024 campaign.
Courtesy of Dunhill
In the Mount Street neighborhood, the Matches townhouse on Carlos Place will shut following the company’s collapse earlier this year, although Grosvenor declined to say who the new tenant would be.
Despite the incoming taxes, Labour’s pro-union policies, and the flight of wealthy “non-doms” from London to tax havens such as Milan and Dubai, Lea and others believe that London can still attract — and retain— luxury brands.
Wealthy people, Lea said, “still want to be in London. The schools and the infrastructure make it easy to live here, and that means the brands need to be here, too.”
According to international estate agency Savills, vacancies in central London are low, domestic spending has been recovering, and “affluent villages” such as Sloane Square and its environs, which have been undergoing refurbishment under owners the Cadogan Estate, are flourishing.
Economy Is Improving
According to Savills, the country is better off economically than it was 12 months ago, and “confidence is bouncing back.” Over the summer, the Bank of England trimmed mortgage rates and it’s likely they’ll do so again in the fall, which should help spur more investment in property.
Dior’s new Sloane Street London store.
Courtesy of Dior/Jonathan Taylor
Dee Corsi, chief executive officer at New West End Company, is also cautiously optimistic about the market right now.
She said the summer was a busy one in central London, bolstered by tourists visiting Europe for the Olympics (or opting for London over Paris because of them) and the arrival of the good weather, albeit in late July. But retailers still need government support, she added.
“We cannot rely on seasonality or sporting events to drive footfall. We are calling on the government to deliver a dedicated plan to boost tourism year-round, benefiting businesses and workers across the nation. While there is no silver bullet, reinstating tax-free shopping would be a simple and effective first step to putting ‘Brand Britain’ on a truly competitive footing once more,” she said.
The lack of tax-free shopping has been a blow to retailers across the U.K., who have been watching their big-ticket sales drain away to France, Italy, Spain and other countries that offer the perk to non-EU tourists.
Earlier this summer, Selfridges’ outgoing CEO Andrew Keith blamed the lack of tax-free shopping, and other factors, for the latest round of layoffs at the store.
In a memo, Keith said the continued absence of a tax-free shopping scheme in the U.K. “has significantly impacted international sales.” In May, the store said it planned to cut 2 percent of its headcount, or about 70 head office roles.
(Separately, in July, Selfridges confirmed that Keith was stepping down of his own accord and that he would be succeeded by André Maeder, CEO of Selfridges Group.)
A window from Selfridges’ Sportopia summer takeover.
Despite the clarion call of the retail industry here, and London Mayor Sadiq Khan’s desire to reinstate the tax-free scheme, which was canceled in 2021, it looks unlikely that the Labour government will reinstate it.
Stores Continue to Open
Still, the retailers keep coming.
Corsi said the West End, which spans Mayfair, Soho and the area around Oxford and Regent Streets, is set to welcome a number of new names later this year.
They include the French accessories brand Polène, which will open its first U.K. boutique; the immersive retail specialist Future Stores, which is opening its first flagship on Oxford Street, and the high-end activewear company Vuori, which is planning its second London store, on Regent Street, not far from fellow U.S. brand Alo Yoga.
Other brands planning to open new stores in the West End include Jacquemus, Moncler and Carolina Herrera on New Bond Street, Rolex on Old Bond Street, and Ikea, which will take over the former Topshop flagship store in Oxford Circus.
Like so many retailers, Europe’s major luxury groups remain bullish about London. With property prices still relatively low, and interest rates high, they’ve been quietly expanding their portfolios and elbowing out investors that rely on banks to finance their deals.
Last year, Swatch Group purchased the Harry Winston building on New Bond Street in London in a deal worth 90 million Swiss francs.
Courtesy
LVMH Moët Hennessy Louis Vuitton, Max Mara’s Maramotti family, Chanel, Prada, Richemont and Swatch Group have been stockpiling prime property, or taking longer leases on buildings in order to secure the best possible locations in the British capital for their stores.
According to Savills, luxury groups have been “very active” in London, and internationally, with 2023 being a peak year for investment. “They were particularly acquisitive in the immediate aftermath of the pandemic, capitalizing on uncertainty and continue to be so,” the company said.
The big brands — and their owners — “are thinking long-term, and looking to protect their positions” in London, and other big fashion cities such as New York, Paris and Milan, in anticipation of better times ahead, Savills added.
