Cheap luxury goods are luring the super-rich to London thanks to the Brexit pound plunge

There's a new global capital of luxury. As the pound plunges, the international super-rich are flocking to London to bag cut-price diamonds, cashmere and even wedding dresses, reports Lucy Tobin
The Brexit shopping boom is underway
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Lucy Tobin17 November 2016

You don’t get much more niche than a £500 Japanese ceramic sushi knife retailer in a hidden-away alley in Kensington, and I’ve been wandering past its unbothered doorway for years wondering how it pays the rent. This month, though, it’s suddenly been busy. It’s the same story at the £400 pillbox-hat shop a few doors down.

It’s the same story, in fact, across London’s luxury shops. The perennially deserted are suddenly packed, the usually-popular are running out of stock.

Where once New York was the place to fly to for bargains, London has nicked its crown. The Brexit-fuelled plunge in the pound means that, around the world, airlines are publishing glossy ads plugging their flights to London as a ticket to a cheap-shopping mecca. A Wall Street Journal headline recently dubbed the UK a “bargain basement for luxury”.

While retailers have hiked up the prices of electronics (thanks, Apple), imported wine and cars, the already-fat margins on luxury goods mean that many of the capital’s poshest stores have left the price tags as-is and watched them being marched to the tills.

The pound — now trading at $1.24, down from a pre-Brexit figure of $1.45 — has made the UK the “world’s cheapest place to buy luxury goods”. According to Deloitte, 64 per cent of the priciest handbags and clothes now sell for less in Britain than in the US, China and France.

The shopping spree started promptly: when the pound tumbled eight per cent on the first morning after the Brexit vote in June tourists who were in town already began buying more.

One Chelsea shop assistant told me her store ran out of bags that Friday (“the French didn’t stop spending”), while China’s Wuhan Morning Post ran a speedy headline proclaiming “Pound’s depreciation sparks shopping fever”.

 64 per cent of the priciest handbags and clothes now sell for less in Britain than in the US, China and France
AFP/Getty Images

Shoppers are travelling from across the globe for a London bargain. “It’s not just Europeans and those in Asia who are more interested in London and the UK post-Brexit but Americans and Australians too,” says a spokesman for Harvey Nichols. “London is always buzzing with tourists in the summer, but there was a noticeable increase in international spend and footfall, and international customers are staying longer into the autumn.”

What are they buying? At Harvey Nicks it’s jewellery, pricey make-up (September saw double-digit growth across its beauty counters) and handbags: the store has had to repeatedly re-order Gucci’s Dionysus hobo bag as tourists flock to snap it up — for £1,180 in London, compared with $1,890 at New York’s Bergdorf Goodman.

Design and interiors shops in London

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While luxury goods buyers probably aren’t penny-pinching, for those on a spree the savings can add up. A Speedy 30 handbag from Louis Vuitton costs £645 in London compared with €760 in Paris, $970 in New York, and 7,450 yuan in China, according to Deloitte. A men’s cashmere V-neck sweater from Brunello Cucinelli, meanwhile, costs £650 in London, €840 in Paris, $995 in New York or 8600 yuan.

In London’s “Luxury Quarter”, a rebranding of the upmarket shops and hotels anchored around New and Old Bond Streets, which includes Balenciaga and Aspinal of London, international spending (which is, before anyone gets too excited about HMRC’s takings, tax-free) grew by 36 per cent in August and 18 per cent in September.

China’s huge luxury splurge in London was most noticeable, though, in the first week of October — “Golden Week”, the twice-yearly national holiday which sees its wealthy folk flock abroad. Their tickets might have booked well before Brexit but their yuan had a lot more spending power when the Chinese arrived — in fact, their trips were 20 per cent cheaper than at the same time last year.

London's Luxury Quarter: Old Bond Street
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They shopped accordingly: Chinese tourist spending in the West End during Golden Week was more than triple last year’s total, to an average of £1,256 per shopper, according to the New West End Company.

Fashion designer Amanda Wakeley’s Mayfair and Chelsea stores have seen sales rise 30 per cent, something her partner Hugh Morrison partly credits to “the very strong Golden Week performance from the Chinese”.

Wealthy euro-spenders are even flying in on private jet shopping sprees: booking firm PrivateFly says inbound London leisure flights from Europe are booming, thanks to the cheap pound. An Expedia poll of 11,000 Europeans put London as “the top city for value” and Penhaligon’s, the perfumier used by Prince Charles, says it has “noticed the return of the European customer post-Brexit, especially the Italians and French”.

Shoppers, it adds, are “trading up to our highest price-point collections” or buying all four fragrances of a set at once. That’s £720 for four perfumes.

“We even had a customer buy 20 pieces of the collection in one go,” the perfumier adds. This would cost more than £3,000.

In Burlington Arcade, one of London’s oldest shopping centres, where Penhaligon’s perches alongside Chanel and Manolo Blahnik, post-Brexit sales shot up by an average of 20 per cent thanks to tourists, according to its European investor-owner Meyer Bergman.

So far, most luxury goods firms haven’t upped their prices. “Luxury brands are usually cautious about ‘en masse’ pricing adjustments because that risks a negative perception in the eyes of the consumer,” says Nick Pope, head of fashion and luxury goods at Deloitte. “People don’t like paying more for the same product.”

But that won’t last forever. European brands in particular can’t perennially swallow a painful exchange rate hit at their British businesses. Michael Ward of Harrods reckons luxury goods in London will be priced alongside the euro within three months. Fashion tongues claim a certain monogrammed bag company has already pushed up prices without hurting demand.

“A number of brands have started to move — typically the ones with less price sensitivity in their customer base,” Pope adds. “But if this sterling position becomes the ‘new normal’, and margins come under continued pressure, I’d expect more brands to respond with pricing adjustments.”

In the meantime, niche luxury industries are cashing in on the boom: you can barely hear an English voice on Marylebone’s Chiltern Street as London’s wedding suppliers roll around in Brexit-fuelled cash. And over in Chelsea, royal wedding-dress designer Sassi Holford says foreign brides have been banging down the door: “Our US orders are up 50 per cent, as well as an increase in orders from South Korea and Japan. My London store had a Brexit-busting July and August but there was little difference in my other shop in Taunton. I get the impression tourists see what good value London is at the moment and are flying in to spend.”

Autumn wardrobe architect

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Tourists are travelling here to buy the rest of their wedding gear too: Mayfair’s House of Garrard, one of the world’s oldest jewellers, says its “highly-mobile clientele” are spending more as well as arriving in bigger numbers. “One particular thing we have noticed,” says chief executive Joanne Milner, “is an increase in impulse buys — from engagement rings to tiaras from the Garrard collection [which start at £1,190].”

Will the boost last? The luxury goods industry is at pains to point out that shoppers aren’t just coming for bargains: Michelle Emmerson, chief executive of trade group Walpole, whose members include Burberry, Alexander McQueen, Harrods and Jimmy Choo, says while the exchange rate attracts customers, “UK luxury retailers provide tailored experiences that serve international customers — extended shopping hours, international payment systems, in-store dining, international delivery options, as well as multilingual staff”.

But since the weak pound doesn’t look like it will recover any time soon, and with European-owned stores set to hike up their prices first, British brands could continue to feel the benefit.

Follow Lucy Tobin on Twitter: @lucytobin

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