British luxury is making a significant comeback but if it really wants to compete globally the UK needs to diversify and be more open says Edward Craig
'British' has always been a byword for luxury in many parts of the world, with an irresistible appeal. And we now know that British luxury is now worth more than ever before: ’32 billion in 2014 and a forecast ’54 billion by 2020, according to the latest report on the health of the sector from Charles Russell Speechlys and luxury brand association Walpole.
It's an important success story for many reasons. Unlike other sclerotic UK industries, British luxury brands are prolific exporters, with 78 per cent of production destined for lucrative overseas markets, particularly to markets in the Middle East and Asia.
Their cachet produces a 'halo effect' which fuels connected industries, such as tourism: travellers flocking to London's West End have broken visitor records each year since 2012. British culture, heritage and craftsmanship are all major draws, boosting tourism and employment as well as overseas consumption.
It's a virtuous circle, but without good policymaking and business planning, luxury's continued growth won't last forever.
Businesses with the ability to create and innovate are rare, but they are the foundation of the UK luxury sector. Creativity must be protected and nurtured. This means building flexibility into the UK visa system to make sure that UK businesses can bring in the right talent from around the world; it means educating up-and-coming brands about the importance of protecting their intellectual property; it means nurturing the right talent and the right skills; and it means preserving a fertile climate for investment, licensing, franchising and ultimately growth.
In the past, luxury brands have been obvious targets for counterfeiters and copycats operating out of China and South-East Asia. That situation is being addressed, but many companies are still vulnerable and need to invest in protecting their brand.
The luxury sector's ongoing success also hinges on London continuing to be an attractive and accessible shop window. Over 17 million tourists visited the capital in 2014 from almost every country in the world – including nearly 100,000 Chinese (who stay longer and spend more money on average than other tourists).
But compared to France, the UK is losing potential revenues of ’1.2 billion annually from Chinese visitors due to our restrictive visa system. London is currently the most frequently visited city in the world, but it can't be complacent: New York, Paris, LA and Sydney are increasingly serious competitors for luxury tourism.
Finally, the luxury sector will need to build resilience and adaptability to continue to flourish. Recent volatility in some key global markets demonstrates that over-reliance on any one market is risky. Diversification and expansion will be critical to success over the next half-decade.
A strong British luxury sector is good for the UK as a whole; government and policymakers should work on ensuring the sector is able to realise its full potential.
Edward Craig is partner and head of the Retail and Leisure Group at Charles Russell Speechlys