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Fashion, luxury and lifestyle news aggregator - September 2022

Posted: 30/09/2022


London luxury market among the big winners in mini-budget

Of the many measures contained in the UK government’s mini-budget announcement at the end of September, retailers had cause for celebration over the news that VAT-free shopping will be reintroduced, after it was somewhat controversially scrapped post-Brexit by former chancellor Rishi Sunak. At the time some of the UK’s biggest retailers, including Harrods and Selfridges, expressed concern that the move would disadvantage London when compared with other major shopping destinations like Paris and Milan.

“Britain welcomes millions of tourists every year, and I want our high streets and airports, our ports and our shopping centres, to feel the economic benefit,” said chancellor Kwasi Kwarteng, addressing the House of Commons on Friday. Although the scheme will be subject to consultation to “gather views on the approach and design”, it is expected to be fully introduced in 2024, costing an estimated £1.3 billion in the first year.

Retailers have welcomed the move: luxury membership group Walpole, which counts Alexander McQueen, Burberry, Claridge’s and Harrods as members, has previously estimated that this reintroduction could result in retail sales of £1.2 billion and create an additional 600,000 tourists. It also estimated that luxury tourism contributes approximately £30 billion to the UK’s economy. Helen Dickinson, CEO of the British Retail Consortium, said: “We welcome the reintroduction of tax-free shopping for tourists, which will boost sales and bring the UK back in line with other European nations.”

From Marmite to Moët: will brands retain their royal warrants after the Queen’s death?

Most consumers will have bought a product featuring the Royal Warrant of Appointment, even if by accident. There are over 800 holders of royal warrants, including suppliers of luxury goods such as jewellery and champagne, but also manufacturers of umbrellas, paint, ketchup, and many more everyday items. The royal warrant is seen as a marker of quality: consumer behaviour expert Dr Amna Khan has called it “the best endorsement any product can get”.

The royal warrant may be awarded by certain members of the Royal Family to their preferred suppliers of goods and services. This gives the warrant holder the right to display the coat of arms of the person who has granted the warrant – for example, on packaging, at their premises, or on their vehicles – accompanied by a legend giving details of the warrant. Contrary to popular imagination, royal warrant holders do not provide their goods and services for free to the Royal Households, nor is there a requirement that they are British  – several American companies, including Kellogg’s, hold royal warrants.

As the Prince of Wales, King Charles III granted approximately 180 royal warrants, and those companies will continue to hold those now that he is the monarch, although it is unclear whether the insignia will need to change. But what will happen to the more than 600 royal warrants granted by the late Queen Elizabeth II?

The Royal Warrant Holders’ Association states that all royal warrants granted by the late Queen became void upon her death. However, businesses holding royal warrants will be able to continue to use the arms for a further two years, and will be able to reapply during this window. Ordinarily, 20-40 royal warrants are cancelled each year – if businesses go out of business or fall out of favour - and a similar number of further warrants are granted. The Queen’s death may result in a larger influx of applications given how many businesses are affected.

In addition, the Queen Consort now has the power to award a royal warrant, and it is likely that the King will grant Prince William the same power, so there may also be new opportunities for businesses that have not previously been warrant holders. Suppliers are eligible to apply if they have supplied the Royal Households for at least five out of the last seven years, although they must also meet a number of standards, which many consider are likely to include sustainability criteria.

Patagonia

Yvon Chouinard, founder of outdoor clothing brand Patagonia, has handed over voting rights of the company to a charitable trust that will use future profits to battle the climate crisis. Patagonia is a leading outdoor clothing company, founded in 1973, and sales this year were around $1.5 billion.

The announcement was accompanied with an open letter stating that the money made by Patagonia after reinvestment ‘will be distributed as a dividend to help fight the crisis’. While continuing to operate as a private corporation run for profit, the company’s voting stock is being transferred to the Patagonia Purpose Trust, which will be overseen by the Chouinard family

The move has been self-characterised as a new alternative to an initial public offering (IPO). In Chouinard’s public letter announcing the plans for the brand’s future, he described the move as ‘going purpose’ as opposed to ‘going public’. He explains that an IPO would have placed the company under ‘too much pressure to create short-term gain at the expense of long-term vitality and responsibility’.

The trust in which the stocks have been placed is a ‘purpose trust’, a specific type of trust whose existence is to meet a defined objective (often for the care of specified pets, buildings or clear charitable purpose). The main difference between a purpose trust and other more conventional trust structures is that the beneficiary of a purpose trust is a purpose, and not an individual or group of beneficiaries.

In the United States, purpose trusts can work well when the purpose is clearly enough defined. The use of a purpose trust for a broader purpose is an arrangement which is largely untested in the United States legal system, although it is used throughout Europe. However, there is a severe lack of guidance currently available for a purpose trust used to operate a business, which will face unique challenges such as changing market conditions.

It remains to be seen therefore whether ‘going purpose’ presents itself as a viable and effective solution for large corporations looking into alternative corporate structures and stakeholders.


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