The UK’s luxury sector is now contributing £81bn a year to the UK economy and is helping the Exchequer raise £25.5bn in tax receipts – as revealed in our landmark new study, Luxury in the Making. Produced in association with Frontier Economics, the research has found that the luxury sector’s economic contribution (equivalent to 3.7% of GDP) has grown an impressive 69% over the last five years to 2022, with companies operating within British luxury now supporting 454,000 jobs, directly and indirectly across a range of roles – from design and digital, to high-tech manufacturing and heritage crafts.
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. However, our advice to the policymakers is that without tax reform and changes to intellectual property laws, the sector’s meteoric growth could stall.
"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 £81bn and vital to the UK economy," says Helen Brocklebank, Chief Executive of Walpole. "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."
Walpole forecasts that, by 2028, British luxury could be contributing £125bn a year to the economy, meaning the sector would be generating more revenue than the life sciences and construction industries, which are currently worth £97bn a year and £110bn a year, respectively.
A key part of our report is an examination of the jobs and careers the luxury sector provides, how the industry benefits the people it employs and its impact on the broader UK economy, cutting across sub-sectors including whisky, sparkling wine, automotive, hospitality and fashion.
Despite a strong outlook, threats to the sector’s long-term prosperity, and the value it can deliver for the country, remain. The Luxury in the Making report has identified areas where changes to government policy would set the luxury industry on a trajectory to deliver further growth in good quality, rewarding employment, while driving economic growth and protecting the UK’s world-class industrial crafts and the communities they serve.
Among the calls are for changes to be made 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.
The report highlights the need to support heritage craft in the same way that food and drink products are currently supported and protected. Such measures would also provide protection throughout the supply chains and the communities they support, especially in areas like Stoke, where, without a change in approach, the region’s pottery skills are in danger of being lost.
Policymakers must also shape a tax and regulatory system that supports high-quality employment. This month’s Spring Budget was a missed opportunity to reintroduce VAT-free shopping for international visitors, however, 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 (AIR) estimates retailers will lose £1.5bn 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.
The UK’s high-end automotive sector – which includes companies like Aston Martin, Jaguar Land Rover, Rolls-Royce Motor Cars and Bentley Motors – was British luxury’s standout performer between 2017 and 2022. Over the course of the last five years, the sector achieved turnover totalling £32.9bn. This is more than double the amount of the second-best performer, food and drink, which reported turnover of £12.02bn.
Automotive’s strong performance comes despite Britain’s departure from the European Union. The sector has fared well in the face of supply chain issues – notably the semiconductor shortage which gripped global markets during Covid-19.
The publication of Luxury in the Making comes just a few weeks after Indian conglomerate Tata, Jaguar Land Rover’s parent company, committed to building Europe’s largest electric vehicle battery factory in Bridgewater, Somerset. The £4bn facility is expected to create 4,000 jobs and be operational from 2026.
"British luxury has shown incredible resilience and strength over the past unprecedented few years," says Michael Ward, Chairman of Walpole and Managing Director of Harrods. "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.”
Photo credit: Sam Walton
