Currency boost diverted £725m of international spend to UK stores in December

The continuing weakness of the UK’s currency boosted retail sales to tourists in December as foreign shoppers spent £725m, a 22% increase, or £130m more than a year ago. And a lot of that was spent on fashion and luxury goods.

At the same time, that meant an extra £725m not being spent in many Asian, American and European stores.

The weak pound drove the massive rise in spending on non-UK credit cards, payments processing firm Worldpay said.

International tourist spend provided a safety net for UK stores in December

The biggest boost was for visitors from Hong Kong who were the highest spenders, followed by visitors from the US, United Arab Emirates and mainland China.

Hong Kong shoppers spent an extra 69% in UK stores while those from China spent 24% more. European tourists also increased their spending with a 14% rise for both French and German visitors.

The pound has fallen 18% against the dollar and 12% against the euro since June 24 when it was announced that 52% of the votes in the UK’s EU referendum were for the Leave campaign.

While tourist data regarding overall visitor numbers has been contradictory since then, it has become clear that retail tourism, as shoppers take advantage of lower prices in the UK’s fashion and luxury stores, has risen.

Wolrdpay chief marketing officer James Frost said the overseas boost had helped counter the move online among domestic UK consumers.

But the downside of this is that some locations have benefitted more than others, central London clearly being a key beneficiary.

Worldpay said high-end boutiques and department stores in London's West End saw a 35% year-on-year increase in spending from overseas tourists. Outside of London, the biggest winners were Edinburgh with a 24% rise and Manchester with a 19% increase.

Frost added: “UK retail centres, including London’s West End, are a magnet for visitors from all over the world, made all the more attractive by the bargains on offer as a result of the weakened pound.”

However, while the pound continues to stay low, the Brexit boost may not last long. UK retailers are already focusing on price rises due to higher costs of imported goods, while global luxury brands have signalled that they will raise UK prices in order to harmonise international pricing.

The prospect of a potential tailing off of the Brexit boost also has implications for the comparable sales figures of UK businesses. With the second half of 2016 having been artificially bolstered by the falling pound, H2 2017 could present some tough comparisons with some retailers likely to be facing a sales dip later this year.

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