LONDON (Reuters Breakingviews) – In Samuel Taylor Coleridge’s “The Rime of the Ancient Mariner,” the protagonist mysteriously shoots an albatross which until now has acted as his ship’s lucky charm. In 2021, a similar fate will befall one of Britain’s golden geese: duty-free allowances for foreign tourists. The government’s decision to change benefits that may have provided a useful post-pandemic boost could become a symbol of its disorganized division from the European Union.
Bicester Village is not one of the UK’s most famous tourist attractions. But thanks to discounted Gucci bags and practical duty-free refunds, Chinese tourists in 2019 visit the small town of Oxfordshire as often as Buckingham Palace. To make it even more bizarre, the British government decided in September to abolish the tax cuts that fueled the phenomenon.
The UK’s obvious reason is to punish European tourists, thereby helping to pressure the EU for a more lucrative trade deal. UK bean counters argue that over 90% of visitors to the UK are not on a duty-free scheme, so few will miss it. And the UK’s Office of Budget Responsibility reckons it could raise around 500 million pounds in new tax revenue.
Yet nearly two-thirds of non-EU tourists are less likely to visit the UK without a rebate, the Global Blue survey shows. Tourists can still purchase tax-free items in the UK, but they have to pay to have them shipped back to their home countries, and insurance costs for luxury items like watches are high. The result, according to the Center for Economic and Business Research, is that arriving tourists can reduce expenses by up to 6 billion pounds.
It will be difficult to recoup these lost tax revenues. China has been trying to encourage duty-free spending at home, due to initiatives like the joint venture between Alibaba and Dufry. France, home to Hermès International and LVMH’s Louis Vuitton, has cut the minimum value of items that can be claimed VAT.
Covid-19 has hit retailers and airports that depend on tourism spending. Tax deduction prohibition of twisting knives. Some airports can lose up to 40% of their revenue, York Aviation research estimates. British trade agency Walpole said luxury retailers such as Burberry and Mulberry would be hit the hardest, as tax-free shopping accounts for as much as 60% of their sales. Overall, this is a story of avoidable economic losses – unlike Brexit in general.
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MILAN / SYDNEY / LONDON (Reuters) – Italian luxury designer Brunello Cucinelli makes men’s suits that sell for up to 7,000 euros ($ 8,200). But even he – like most people around the world – hasn’t worn a suit for months, let alone bought one.
“We are all locked up at home, so this is the first jacket I have worn since March,” Cucinelli told Reuters in Milan as he presented his new collection in September, wearing a light gray blazer.
Most people in “white collar” jobs work from home, with a newfound love for sweatpants, a trend some experts hope to outlast the pandemic. And few, if any, weddings or parties are taking place.
This seismic shift in behavior has had a profound impact across the supply chain for suits and formal wear, boosting a fashion sector that spans every continent.
In Australia, the world’s largest producer of merino wool, prices plummeted, reaching their lowest point in a decade. Many sheep breeders are in trouble, keeping wool in every pen that is available in hopes of recovering it.
In northern Italy, wool mills that buy from farmers and weave cloth for high-end suits have seen their own orders from retailers take a dip.
In the United States and Europe, several retail chains specializing in business apparel such as Men’s Wearhouse, Brooks Brothers, and TM Lewin have closed stores or filed for bankruptcy over the past few months, and many more could follow.
Players at all levels have told Reuters they are being forced to adapt to survive, from farmers turning to other forms of agriculture to factories making more elastic fabrics to new types of clothing that wrinkle less and are more resistant to stains.
“People want to be more comfortable and less inclined to wear formal suits,” said Silvio Botto Poala, managing director of Lanificio Botto Giuseppe, a wool factory at the textile center Biella Italia that counts Armani, Max Mara, Ralph Lauren and Hermes among its customers.
“With Zoom conferences and smart work, you will see men wearing shirts, maybe even ties, but not many suits.”
MERINO FARMERS UNDERWAY
The price of fine wool in Australia has more than halved during a turbulent 18-month period, as the usual healthy purchases of merino wool from Italian factories have almost stalled.
The benchmark price for merino wool fell to A $ 8.58 ($ 6.1) per kg in early September, auction results show, down from A $ 20.16 in early 2019. Since then, some have recovered to over A $ 10 .
Andrew Blanch, managing director of New England Wool in New South Wales, which sucks wool from farms for Italian textile makers, said many buyers now have excess supplies.
“They all have wool that needs to be thrown away before they even get back on the market here,” said Blanch, speaking by phone from a wool auction in Sydney’s western suburbs.
“If the shop doesn’t open, everyone just retreats. Many orders we buy from wool have recently been canceled by their clients in the US and throughout Europe. “
He said China, which along with Italy buys most of Australia’s annual wool exports for more than A $ 3 billion, is now “the only exhibition in town” although Chinese buyers are also getting less wool.
Many merino sheep breeders store their wool in sheds or storage facilities; although some people who are still emerging from a three-year drought sell their balances to weak markets in order to survive financially.
“Not everyone is big enough to hold their wool clips and wait for the prices to change,” said Dave Young, a farmer near the town of Yass in New South Wales. “We are in a position where we have to fill the market in a relatively short time after the price reduction.”
Young, who has about 4,500 sheep on his property, said he had refocused some operations to provide lamb.
WOL WEAVER GLOOM
The food chain is surging into northern Italy, and Botto Poala estimates his factory sales are down 25% from 63 million euros last year and they will take 2-3 years to recover.
However the business is isolated to some degree because most of it makes women’s clothing fabrics; others are more pessimistic.
“For some businesses, we are talking about a 50% -80% drop in sales,” said Ettore Piacenza, general manager of the Fratelli Piacenza wool factory, a centuries-old family business with an annual turnover of 52 million euros. He also heads the wool mill department of a local business association.
Botto Poala says more than 50% of his mill’s turnover now comes from wool which has been made more elastic by tilling it or adding lycra to it.
This is because whatever demand remains for a suit, it is more likely for fabrics that are more stain resistant and less wrinkled, while such fabrics can also be used for casual wear, the wool mill said.
Italian luxury label Etro, for example, recently launched a “24 hour jacket” made of jersey and combining wool and cotton.
‘MY CLIENT IS AT PJs’
The gradual movement towards casual clothing has been taking place over the years. In 2019, even Goldman Sachs – a bastion of custom-made suits – relaxed the dress code for its staff. Not to mention the rise of Silicon Valley’s hipsters.
But COVID has stepped up that change – increasing sales of comfortable and sportswear at the expense of business wear.
In the second quarter of this year, when much of the world was locked in, Nike became the hottest brand according to Lyst, a global fashion search platform that analyzes the behavior of more than nine million online shoppers every month.
This is the first time since the Lyst Index began that a luxury fashion brand has not occupied the top position.
Gap’s Athleta unit, which sells tights, jogging pants, sweaters and tracksuits, was the best performing fashion line in the three months to August 1. Sales were up 6%, compared to a 52% drop at Banana Republic, which is known for its more stylish outfits.
Clothing was ranked among the items with the highest discounts and lowest sales in France, Italy and Germany in September, according to data compiled by StyleSage, which combs prices on websites.
Cheaper labels for mid-market including Asos, Topman, Guess and Hugo Boss had the sharpest price drops, up to 50%.
Falling demand for office clothing led to a multistory of US retailers, also including Jos. A. Bank and J. Crew, filed for bankruptcy during the summer and more retailers face an uncertain future.
Retail consultancy Coresight Research estimates that 20,000 to 25,000 US stores could close by the end of the year, compared with around 9,800 in 2019.
“I admit I haven’t bought office clothes this year. “I can tell you the fact that walking around the City, there are very few lawsuits on display,” said James Whitaker, a partner at the law firm Mayer Brown in London.
Indeed business has been “very slow” even since the late closure of the company for Jasper Littman, a tailor trained on Savile Row, a famous London street for tailoring for men.
Littman said his clients, mostly lawyers and bankers, “sit at home in pajamas”.
She usually makes about 200 outfits a year, but has only made 63 so far in 2020.
Customers are reluctant to take the risk of taking the train to pick up even a suit that has been made with the deposit paid.
“There’s no point in them doing that, because they’ll be getting a coat they can’t wear.”
Reporting by Silvia Aloisi in Milan, Jonathan Barrett in Sydney and Martinne Geller in London; Additional reporting by Jill Gralow, Carolyn Cohn and Aleksandra Michalska; Edited by Pravin Char