Why fashion brands and wealthy Americans (still) love London

LONDON — It’s the summer season in the British capital and the city is buzzing. With Royal Ascot, Glastonbury and the Serpentine Party in June, then sold-out concerts by Bruce Springsteen, Blackpink and Lana del Rey in Hyde Park, the British Formula 1 Grand Prix at Silverstone last weekend and Wimbledon entering its final stages this weekend, it really feels like 2019 all over again.

That’s almost enough to distract from the fact that the UK economy is still in the doldrums, dragged down by Brexit and still suffering from a post-Covid hangover:

• Economic growth is anemic. While Britain has so far avoided a recession, the economy is smaller now than it was before the pandemic. On Thursday, the Office for National Statistics (ONS) said the UK economy had “shown no growth” in three months. Among the rich countries of the G7, only Germany is doing so badly.
• Inflation remains stubbornly high. While headline inflation in the US fell to 3% in June 2023, UK inflation in May was still at a staggering 8.7%. At this rate, Prime Minister Rishi Sunak’s pledge to halve inflation by the end of the year looks very difficult.
• The housing market is in crisis. According to Halifax, UK house prices fell 2.6% in June from a year ago, the fastest fall in 12 years. Meanwhile, rents are soaring, further worsening the cost of living crisis.

The pessimistic economy makes life miserable for millions of low-income people who bear the brunt of the damage.

And then there’s UK tourism – a key driver for the British fashion industry – which is still below 2019 levels. According to VisitBritain, 35.1 million people will visit the UK this year , down 14% from 2019. In Spain, one of the most visited countries in the world, tourist arrivals in May 2023 were 3.8% above 2019 levels.

One of the key factors in Britain’s tourism malaise is the lack of Chinese visitors. According new analysis by BoF Insights, Chinese customers are traveling again, but most are staying close to home. (Our survey indicates that Japan is currently their top international destination.)

Another factor is the lack of VAT refunds. Previously, non-residents could reclaim the 20% sales tax on fashion and apparel purchases. Especially for Chinese tourists returning to Europe, without a VAT refund, the UK is a much less attractive destination than France or Italy.

The one major exception is for wealthy Americans. Last year 4.5 million Americans visited the UK, up 2% from 2019. Americans are also staying longer and spent a record $7.45 billion in 2022 , up 42% from 2019.

I got a taste of that at Twenty-Two, the new private club in Mayfair where, on Monday, investor and former Hollywood super agent Michael Kives hosted a dinner party attracting a who’s who of Hollywood and the American business elite. From singer Katy Perry and her partner, actor Orlando Bloom, to David Bernard, the producer of the hit TV show “White Lotus” and Darnell Strom of the United Talent Agency, it was like Los Angeles had been transplanted to London.

How do you attract that kind of crowd on a Monday night? Well, first you need to be exceptionally well connected. But what made it easier was that many of the guests had already been in Europe for several weeks – to attend the Cannes Lions Festival, fashion weeks in Milan and Paris, or the Brilliant Minds Festival in Stockholm – using London as a base because it’s so easy with a common language and history.

It’s the same reason why so many fashion and beauty brands are choosing to expand into the UK market, despite the faltering economy, like our London-based luxury correspondent Tamison O’Connor reported this week.

“Even though the UK economy is stuck in a rut, it retains an appeal for international brands looking for their next market to conquer,” she writes. “It is the largest predominantly English-speaking economy after the United States. It is an important market for fashion and beauty. Its wealthiest buyers are concentrated in London, also a global tourist destination.

Here are some other picks from our fashion, luxury and beauty reviews:

1. What Chinese luxury customers want — With China’s zero-Covid policies easing from late 2022, global brands and retailers are eagerly preparing for the return of Chinese travellers. They will wait a little longer. The latest report from BoF Insights, Dynamic travel: Chinese luxury buyers at home and abroadunpacks travel sentiments, luxury shopping preferences and behaviors and advice for luxury players in a changing market landscape.

2. Can fashion ever be truly sustainable? — A flurry of news this week highlighted just how complicated it is to create a more sustainable fashion industry. While Inditex promoted its climate ambitions, industry watchdogs Underline the limitations of such statements in the annual Fashion Transparency Index. While Chanel relaunched its investment in the field of Oritain traceability in the context of a fundraising of 57 million dollars, the new sustainable development columnist of BoF, Ken Pucker examined why mushroom leather failed to flake off.

3. Will the third Swiss watch brand continue to progress? — Omega sales have recovered and exceeded pre-Covid levels, CEO Raynald Aeschlimann said to Robin Swithinbank this week. But aggressive price hikes, progressive marketing and an authenticity scandal could challenge the rise of the Swatch-owned brand.

4. The job of being Kim Kardashian —Kim Kardashian is would have buy out Coty’s stake in her beauty business as Skims seeks to close a pre-IPO cycle at a valuation of $4 billion. All in a week’s work for Kim K, plus an appearance at the D&G Alta Moda festivities in Puglia, wearing a stunningly beautiful white gold necklace and “Rubellite” tourmaline with an aubergine taffeta dress. Rachel Strugatz has the Scoop preview why a Coty takeover might take place.

5. How fashion entered Formula 1 racing – At the British Grand Prix at Silverstone on Sunday, the brand’s Tommy Hilfiger eased its relationship with Mercedes and Brad Pitt and Damson Iris made an appearance as part of a new film co-produced by F1 rockstar Lewis Hamilton and Mr. Hilfiger himself. F1, with its annual year-round racing schedule and the hit Netflix docuseries “Drive to Survive”, is entering mainstream pop culture. As the founder of Palm Angels, Francesco Ragazzi says Daniel Yaw-Miller“It’s like having a Super Bowl every weekend.”

The BoF Podcast

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Earlier this year, I had the pleasure of sitting next to menswear designer Oliver Spencer at a dinner party he hosted in London. It’s always great to get to know the person behind a brand, and that was especially true with Oliver because he’s a great storyteller – and has some amazing stories to tell. Above all, he did that rare thing: build a profitable, independent fashion brand.

“Small is beautiful. You need to have a certain turnover to reach these levels, but you don’t need hundreds of millions [of dollars] to run a profitable brand,” says Oliver.

This week on The BoF PodcastI sit down with Oliver to hear his incredible personal journey from a market stall in Portobello Road to running two independent menswear businesses and then adapting to post-pandemic lifestyle changes.

Ask me anything!

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Have a great weekend everyone.

Imran Amed, Founder, CEO and Editor-in-Chief, The business of fashion

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