London Luxury Bargains: Brexit Effect
While the prospect of Brexit is weighing on much of the British economy, tourism and luxury goods businesses are cashing in on bargain-hungry visitors.
While the prospect of Brexit is weighing on much of the British economy, tourism and luxury goods businesses are cashing in on bargain-hungry visitors lured by the slide in the pound.
London’s tourism agency says sales of goods eligible for sales-tax exemption have gone up by a third since the Brexit vote in June, which sent the pound sterling plunging against the euro and dollar.
“We calculated that over the last four months it’s been about 12 percent cheaper for Europeans to come and shop here,” said Chris Gottlieb, head of leisure marketing at the agency London & Partners.
The pound is now at 1.17 euros compared with 1.3 euros before the shock vote to leave the European Union, while it has also fallen to $1.25 from $1.49.
The result is that London has become the cheapest city for luxury goods shopping in the world in dollar terms, according to a study by Deloitte.
Going to spend much more
In tourist areas, the effects are evident. “We’re going to spend much more money than we planned to,” said Radostina Nonova, a Bulgarian tourist, laughing as she lugged her bags on Carnaby Street – in the heart of London’s shopping district.
“We didn’t plan to shop too much but it’s obvious that the prices are very good for us. So we shop and we can afford to eat and drink outside. That was not possible years ago,” she said.
French tourist Christophe Disic said he did not come just because the pound was low but “when we changed our money we realized we had a few more pounds for fewer euros”.
When speaking to US tourists, shopkeepers are quick to take out their calculators.
“We’re an American brand. Our products are designed and assembled in the States. But with the weakening of the pound it actually happens to be cheaper for the American tourists to buy an American product in London,” said Denis Sagajevs, who works in Shinola, a shop selling watches and leather accessories.
“It’s affected by the fact that they can claim VAT on their way back. We pretty much on a day-to-day basis explain that to customers from the States. It happens to be quite a strong sales driver,” he said.
50 percent increase in shoppers
Some shops are adapting their advertising and sales tactics to the new consumer behavior.
“Before the vote, European tourists were couples who came to be together and maybe bought a couple of things,” said James, the manager of a luxury men’s clothes shop on Carnaby Street.
“Now, there are groups of friends who rush in. They grab everything they can carry.”
James estimated that European and US shoppers coming to his store have increased by around 50 percent.
Instead of spending on costly advertising in British newspapers as it did before, his firm is changing tactic to appeal more to overseas visitors.
They have put up signs outside Underground train stations near the shop. But there are doubts about how long the boom can last.
While the good health of the British economy was confirmed by solid growth of 0.5 percent in the third quarter, the official forecasts for 2017 have been lowered to 1.4 percent from 2.2 percent.
“Our British customer sales are not as strong as before the vote and we don’t even know if this tourism boom is going to last,” James said.