Increase taps into surge of visitors to UK, exploiting what has become the cheapest luxury market in the world, say analysts.
Swiss watch exports to the UK rose by 13.4% in July as tourists exploited the drop in the value of the pound to snap up luxury goods.
The Federation of the Swiss Watch Industry said watches worth 110.2m Swiss francs (£87m) were exported to the UK last month, the best figures since November 2015.
The figures are the latest sign of a boost for luxury retailers following the EU referendum result, which has pushed down sterling and made British shops more attractive to foreign visitors, with sales of jewellery and watches across the UK growing by more than 16% last month.
Pound vs. Euro
The UK is now the cheapest luxury goods market in the world, according to analysts at stockbroker Exane BNP Paribas, which has predicted an uplift for British brands such as Burberry, Mulberry and Stella McCartney, as the stronger euro and dollar against the pound fuel tourist visits.
“Tourist inflows and spend are highly correlated to exchange rates. Continental markets such as France have suffered from relatively higher prices and terror attacks. “The likely consequence is a tourist spend boom in the UK,” said Luca Solca, a luxury goods analyst at Exane BNP Paribas.
The increase in Swiss watch exports to the UK compared with July 2015 makes Britain the fastest-growing major market for the sale of brands such as Omega, Breitling and Rolex.
Brian Duffy, the chief executive of Aurum, which owns the Goldsmiths, Mappin & Webb and Watches of Switzerland chains, said his outlets had seen an immediate pickup in sales of luxury watches (above £5,000) on the day after the Brexit vote. This was most evident in London and at the group’s airport stores, he said.
In July 2016 Switzerland exported 110.2 million swiss francs worth of watches to the UK
Swiss watch exports, million Swiss francs (Jan 2015 to Jul 2016)
“It’s very clear there’s a boom going on. We are selling a lot of very high-end pieces here the absolute amount of savings can justify the cost of foreign travel. The savings on a £30,000 watch can pay for a flight,” he said.
Michael Wainwright, the managing director of Boodles, which sells Patek Philippe watches, said the British luxury jeweller had seen good business from Asian and Middle Eastern clients, who usually visit the UK at this time of the year, because the exchange rate had made desired items about 18% cheaper than anywhere else in the eurozone. The pound has fallen by 11% against the euro and dollar since the vote to leave the EU.
Wainwright said the chain had also recorded a rise in American buyers last month, when Swiss watches were as much as 30% cheaper in the UK than in the US.
“To some extent, it is commodity dealing. Collectors will gravitate to the country offering the lowest price and at the moment that is the UK,” he said.
Jewellery sales were also benefiting from the pound’s decline, although the market was less commoditised, and so differences in design, service and other factors had a bigger role to play than the watch market, where collectors know exactly what they want.
“The weaker pound doesn’t have such an enormous benefit as it does on watches, but it will help London, retail and luxury goods,” he said.
Mario Ortelli, a luxury goods analyst at Bernstein, agreed that the UK luxury market was likely to benefit as a whole from the lower value of the pound. “Many tourists will decide to come to the UK, not because they like the weather, but because they think the exchange rate is improving prices,” he said.
Pound against the dollar
But the global market for luxury goods was not likely to benefit overall from strong sales in the UK, he said, as shoppers were merely shifting from one country to another.
However, Ortelli said luxury brands were likely to put up prices to ensure that they protected sales and profits, meaning the boost to the UK may not last. “The benefit will be short term,” he said.
Jewellers said brands including Patek Philippe and Cartier had already put up prices by between 8% and 10%, although Rolex, Omega and Breitling had yet to change.
Meanwhile, Ryanair said it was carrying 20% more Americans and 10% more Chinese from Europe on shopping trips to the UK this summer, which it attributed to the fall in sterling.
The rise in luxury spending in the UK might help brands with British heritage such as Burberry, which have suffered from falling numbers of Chinese visitors to Europe due to terror fears, and to Hong Kong because of visa changes.