The UK’s Top 20 luxury businesses under foreign ownership are growing more slowly than independent UK luxury brands, shows new research by Boodle Hatfield, the leading private wealth law firm.
Boodle Hatfield says that the Top 20 overseas-owned UK luxury businesses had revenues of £798m in the past year, rising just 1.5% per year from £775m two years earlier. In comparison, the Top 20 luxury businesses with independent UK-based owners saw turnover rise 5.5% per year from £4.49bn to £4.99bn over the same period.
The firm says that the figures show that British luxury fashion entrepreneurs do not need to sell their businesses to overseas buyers to drive continued growth.
Jane Ireland, Partner at Boodle Hatfield, says that many luxury fashion entrepreneurs view a sale to a foreign luxury conglomerate or private equity investor as the best way to reach the next level of growth for their businesses. However, she explains, there is a risk that British luxury brands added to a stable of major fashion labels could end up being ‘forgotten’ by their owners, and eventually see their growth tail off.
Says Jane Ireland: “Seeing your brand acquired by one of the luxury brand giants is the dream for a lot of British fashion entrepreneurs. These figures suggest that staying independent might be the better long-term choice.”
“Some brands that have been subsumed by a major luxury multinational have had to compete for capital and management attention. There’s also a chance that their owner won’t fully understand the appeal of the brand, and their brand values will get diluted.”
Many household-name luxury clothing brands in the UK have overseas ownership, including shirtmaker Thomas Pink and men’s fashion brand Dunhill, which are owned by luxury conglomerates LVMH and Richemont respectively. Both jeweller Asprey and bootmaker Hunter are owned by US private equity funds.
However, two of the largest and most successful UK luxury fashion brands in Boodle Hatfield’s research are Burberry and Mulberry, both of which stayed independent until floating on the London Stock Exchange in 2002 and 1996 respectively.
Adds Jane Ireland: “Burberry is an excellent example of how a British luxury brand can be built. Their success has been founded on understanding their market and consistently delivering products that meet consumer demand.”
“Being backed by the capital and distribution of a global fashion business certainly has advantages, but getting the product right is also a key concern. That can be done while staying independent.”
Boodle Hatfield’s research also showed that the Top 20 overseas-owned UK luxury brands made a combined loss of £106 million last year. Only five of the Top 20 made a profit during the period.