High tax punishes UK fashion operations

British tax rates are keeping fashion companies from setting up operations in the UK. Luxury accessories house Mulberry has spoken out about the high rates that prevent the company from manufacturing in Britain. Mulberry's Chief Executive

Offiver Godfrey Davis told Drapers he was considering opening a second factory in the UK next year due to a spike in demand for its bags, but had been put off from doing so by the impact rising National Insurance (NI) rates have on operating costs. Employer NI contributions are set to rise to 13.8% from 12.8% for those earning more than £136 a week in April.

“We would love to make more in the UK but over the past 10 years the political and economic climate has not been conducive to investing in the UK,” Davis said. “We have been investing in things like apprenticeship schemes [to encourage younger staff into the business], but that’s more because we’ve been bloody minded.”

Mulberry, which showed at LFW in February week, is increasing capacity by 30% at its existing UK factory in Somerset, and needs to open another factory next year to meet growing demand for its It bags. Last year the company, which has production bases in Spain and Turkey, doubled its production of handbags, partly thanks to the success of the Roxanne and Alexa styles.

Davis called on the Government to introduce “NI holidays” for manufacturers looking to set up in this country, and said this sort of ongoing tax break would act as more of an incentive to cash-rich British fashion brands than traditional ‘golden handshakes’ used to attract manufacturers from overseas.

“Many British fashion companies are already well-funded so we look at the operational costs of running a business [when making a decision about where to base our factories],” he said. “A constructive approach would be to give some sort of tax break to encourage [businesses] to relocate. An employer NI holiday for a number of years [would work] and UK plc would benefit because we would be creating more employment.”

“When we make anything, it takes a certain number of minutes to make it. It’s the cost per minute that’s important. If NI is put up to 14%, every minute we are paying 14% [of staff wages] to the Government in tax.”

Image: Mulberry AW11
Source: Drapers©