Cheapest pound in 31 years lures Chinese shoppers in their droves to Britain
Bad news for those holding the currency or anyone importing foreign goods, but great for British exporters and overseas bargain hunters
As the pound hit its 31-year-low amid escalating Brexit fears on Wednesday, British retailers and exporters were riding high on the back of a renewed buying spree by big-spending Chinese shoppers, who were celebrating their seven-day national holiday, also known as the “golden week.”
Shares in top British luxury fashion house Burberry Group rallied 5 per cent within a three-day winning streak, after Prime Minister Theresa May’s fresh warning over a potential “hard Brexit”, that could scrap the country’s tariff-free access to the single market.
But the PM’s words sent the British currency to its lowest value since 1985 – bad news for those holding the currency or anyone importing foreign goods, but great for British exporters, listed companies that earn the bulk of their revenues in dollars, and Chinese bargain hunters, especially as loosening visa policies and better air connectivity makes travel to the country easier and cheaper than ever before.
“We are expecting a fresh wave of demand for British brands by Chinese consumers, especially after so many more of them had already been falling for the country as a holiday destination,” said CLSA senior analyst Mariana Kou.
Data from China’s leading online travel site Ctrip showed that Britain – largely immune so far to the terror threats that have hit visitor numbers to other countries in Europe in the past year – predicts a staggering 40 to 60 per cent uptick in golden week tourist flows, as “a softening pound has led to a boom in inbound tourism”.
More Chinese are enjoying golden week getaways to Britain than any other country in Europe bar Russia, according to the Ctrip, with more opting for the 13-hour flight to London rather than travelling to Australia, traditionally more popular with its geographic proximity.
Jieying Chen, who works for a venture capital firm in Shanghai, is one of the hundreds of Chinese flocking to Britain during her seven days off.
She has been treating herself to some retail therapy, buying Jo Malone perfume in Selfridges on London’s famous Oxford Street.
“Brexit definitely shaved a good sum of money off my travel and shopping costs, otherwise I would have chosen to go to somewhere closer home,” Chen said.
Chen set herself a 10,000 yuan shopping budget for her week in Britain. A visit to the iconic upmarket department store Harrods is next, and then it’s off to Bicester Village, home to dozens of brand outlets including Mulberry, Gucci and Burberry.
The fashion brand made famous by its checked-lining trench coats and classic cashmere scarves, Burberry revealed upbeat first quarter revenue in July, which it attributed to a boon in sales from more purchases by visitors to Britain over the final weeks of June – just as the shock announcement was made of the EU referendum vote.
The London-based company predicted then that sterling’s fall was likely to add another 40 million pounds to its full year earnings.
The company’s shares have soared 28 per cent since Brexit on June 24 and have outperforming the benchmark FTSE 100 Index, which has risen 15 per cent.
With the country’s future still plagued by political and economic uncertainties, analysts warn the pound’s value is only set to sink deeper, despite a steep 16.8 per cent plunge in just over three months.
“Investors want to avoid sterling,” said Will Leung, head of investment strategy, wealth management at Standard Chartered.
“We’ve seen some investors looking to buy sterling on the dips, but the risks are high with this strategy because of the uncertainty caused by the Brexit negotiations.”
It appears that British retails such as Burberry can expect their Brexit silver lining to last for a while yet.
With additional reporting by Alun John and Celia Chen.