UK retailers set to struggle during Golden Week as Chinese Yuan falls by 10% in six months, FX broker predicts

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Analysis from corporate FX broker Foenix Partners predicts that UK retailers should expect to see a reduction in profits from Chinese tourists visiting the UK during their national holiday Golden Week (starting 2 October) as a result of the falling value of the yuan which has dropped by 10% in the past six months.

According to Visit Britain, over 185,000 Chinese tourists visited the UK in 2014 with an average spend per visit of £2,688.00. Golden Week is usually a peak shopping time for Chinese tourists in London, but due to the falling currency and the current state of the Chinese economy, which is growing at its slowest rate in the last 25 years, the influx of Chinese visitors to the UK is expected to be down on previous years and those Chinese that do make the journey will have less money to spend.

Since 13 April 2015, GBP/CNY has fallen from below 9.0467, reaching a high of 9.9648 in September 2015 and losing more than 10% (0.91 cents) in five months. As a result, a lower number of Chinese tourists are expected to come to the UK for their Golden Week holiday from 2 October to 7 October hitting hoteliers and retailers.

Luxury retailers in London, the favourite destination for many fashion conscious Chinese, are expected to suffer the most. Shoppers from China will be thinking twice before snapping up the latest Burberry trench coat or the classic Prada tote, conscious of the falling value of the yuan and a weakening economy back home.

Richard de Meo, managing director of Foenix Partners, said: “Golden Week is a pre-Christmas UK shopping bonanza particularly for London’s West End retailers. Chinese spending on Bond Street alone – home to their brand favourites Chanel, Louis Vuitton and Dior – comprised 23pc of the luxury strip’s total spend last year**.

“There is an ongoing re-balancing taking place in China to move the economy from being investment-led to consumption-led, but Chinese consumers have not stepped up to the plate. The reduced availability of borrowed money, brutal stock market losses and falling consumer confidence have clearly impacted the Chinese’s willingness to part with their cash, reflected in imports to China falling by 14.3% in September.

“In preparation for cash-rich shoppers, London’s luxury boutiques will once again install Chinese signage in their windows and have Mandarin speakers behind their counters but, with such a bleak economic backdrop, they should also be prepared for falling sales when compared to the same period last year.”