The British luxury sector is now worth 81 billion pounds annually to the UK economy, supporting more than 450,000 jobs across various sectors, making it one of the top industry drivers of the economy, according to a new report from Walpole.
The ‘Luxury in the Making’ report from the industry body that represents more than 250 British luxury companies, produced in association with Frontier Economics, reveals that the UK’s luxury sector’s economic contribution is equivalent to 3.7 percent of GDP, which has grown 69 percent over the last five years to 2022.
The sector’s growth comes despite a challenging macro environment, including Britain’s departure from the European Union, the Covid-19 pandemic, supply chain issues and rising energy costs, adds Walpole, and has seen the UK luxury sector’s total exports increase by 45 percent in 5 years to 56 billion pounds.
Walpole also notes that the UK luxury sector, which is growing at a rate of 11 percent annually, has also helped the Exchequer raise 25.5 billion pounds in tax receipts. However, without tax reform and changes to intellectual property laws, the sector’s meteoric growth could stall.
British luxury sector could contribute 125 billion pounds a year to the economy by 2028
Helen Brocklebank, chief executive at Walpole, said in a statement: “We are delighted to publish our first study for five years, and the most comprehensive to date, demonstrating that the British luxury sector is valued at 81 billion pounds and vital to the UK economy.
“We have quantified the significant high-quality employment offered by the sector throughout every region in the UK across hospitality, retail and manufacturing. The UK luxury industry deserves recognition and support to ensure our high-growth sector continues to flourish.”
The report forecasts that by 2028, British luxury could be contributing 125 billion pounds a year to the economy, meaning the sector would be generating more revenue than the life sciences and construction industries, which are currently worth 97 billion pounds a year and 110 billion pounds a year, respectively.
Walpole is calling for tax reform and changes to intellectual property laws
Despite a strong outlook, Walpole states that there are several threats to the sector’s long-term prosperity, such as making changes to the UK’s Geographical Indicator (GI) regime. This set of intellectual property laws are granted to produce-based products that have a specific link to the place where they are made; an example of a product protected by such laws is scotch whisky. While the current regime currently applies to food and drinks, Walpole is calling for laws to be extended to include non-produce-based craft products, like Savile Row tailoring or Staffordshire pottery.
Walpole is also calling on policymakers to shape a tax and regulatory system that supports high-quality employment. The trade body is warning that this month’s Spring Budget was a missed opportunity to reintroduce VAT-free shopping for international visitors. It adds that failure to introduce a new scheme would cause “the UK miss out on potential growth, tax receipts and employment opportunities”. The Association of International Retail estimates that retailers will lose 1.5 billion pounds per year to tax-free EU competitors.
Reforms to the apprenticeship levy and more investment into teaching modern foreign languages are also being called for by Walpole and its members, which include the likes of Alexander McQueen, Burberry, Harrods, Fortnum & Mason and Jo Malone.
Automotive, food and drink, and fashion sectors drive growth in British Luxury
The UK’s high-end automotive sector, which includes companies like Aston Martin, Jaguar Land Rover, Rolls Royce and Bentley, was British luxury’s standout performer between 2017 and 2022. Over the last five years, the sector achieved turnover totalling 32.9 billion pounds. This is more than double the amount of the second-best performer, food and drink, which reported a turnover of 12.02 billion pounds.
Luxury fashion and accessories came in third for turnover, achieving 9.93 billion pounds, closely followed by retailers and e-tailers with 8.66 billion pounds in turnover. Beauty, wellness and grooming was sixth with 3.37 billion pounds, while jewellery, watches and precious metals reported 3.12 billion pounds in turnover.
Michael Ward, chairman at Walpole and managing director of Harrods, added: “British luxury has shown incredible resilience and strength over the past unprecedented few years. Since our last report, published in 2019, the sector has faced many challenges – namely the effects of Covid-19 lockdowns across the world, establishing new trading relationships with the EU, greater fragmentation in global trade, and the scrapping of the VAT Retail Export Scheme.
“Despite this, I am immensely proud Walpole, with this comprehensive report, has demonstrated how critical the UK’s luxury sector is to our economic and cultural life, and more than that, that is one of the most vibrant and high-growth industries of the future.”
