Recovering UK beauty industry approaches pre-COVID economic peak but grapples with EU trading red tape

26 Aug 2024 --- A new report by the British Beauty Council in tandem with Oxford Economics shows the UK beauty sector almost returning to its 2019 peak economically, despite structural and economic challenges. The data suggests industry’s direct contributions increased by 11% in 2023, or 3% after adjusting for inflation. 

Overall growth for the sector was helped by higher inflation which is expected to come down in the months ahead. Still, Oxford Economics predicts growth of 3% next year — far higher than the 1% average for the overall UK economy.

“These figures underscore that the beauty sector is a material economic contributor,” asserts the British Beauty Council.

Millie Kendall, CEO of the British Beauty Council, calls on the government to ease access to the EU, which, post-Brexit, experienced an seen almost £1 billion (US$1.1 billion) drop in exports.

“We’ve had to be dynamic and pivot — looking to China, US, Australia, Middle East and India to help grow our exports in the face of increased red tape when trading with the EU,” she comments.

Kendall highlights the local sector still managed to grow compared to its EU neighbors: “The adaptable and agile nature of the British beauty industry enabled us to surpass the biggest four members of the EU in growth across prestige beauty and skin care in the first half of 2024,” she says.

The analysis forecasts cash spending on beauty products and services to increase by 3% this year, a marked slowdown from 2023 as inflation is expected to further cool.“Couple this with our tremendous domestic growth and we have a lot to be optimistic about. Beyond exports, beauty’s domestic influence is astounding, bolstered by the opening of Sephora in the UK.”

Tax revenues and workforce estimates

Economic activity sustained by the beauty and personal care industry supported £7.3 billion (US$9.6 billion) in UK tax revenues, of which £3.6 billion (US$4.7 billion) was contributed directly by the sector and its workforce. 

“For context, the industry’s total tax contribution is large enough to fund 86% of the annual total expenditure by the Department for Digital, Culture, Media & Sport,” highlights the British Beauty Council.

Additionally, the industry’s workforce increased to 418,000 in 2023, a 10% increase fromthe previous year. “As an employer, the beauty industry is more important than the real estate sector,” asserts the British Beauty Council.

Slow spending but “broadly stable” growth

Looking ahead, the analysis forecasts cash spending on beauty products and services to increase by 3% this year, a marked slowdown from 2023 as inflation is expected to further cool. 

After adjusting for inflation, growth is expected to remain “broadly stable” at 1% this year compared to 2.9% last year.

“We have been extremely pleased with the performance of all three of our UK stores since they have launched, with all of them among the top stores in the world,” says Sarah Boyd, managing director of Sephora UK.

“The performance of Manchester Trafford Centre has been particularly encouraging as we continue our expansion across cities in the UK. Year-on-year growth of our first store and our e-commerce business has also been extremely strong, and the customer response to our upcoming launches is brilliant to see.”

Last year, the British Beauty Council noted that the personal care industry contributed a total GDP contribution of £27.2 billion (US$35.8 billion), an 11% increase from 2022. Growth was driven by a 10% increase in spending on personal care products and services by UK households. 

The non-profit estimates that this year, the industry’s direct GDP contribution will be £14 billion (US$18.5 billion), while its indirect and induced GDP contributions will be £5.7 billion (US$7.5 billion) and £8.4 billion (US$11 billion), respectively.

In a recent report, CeraVe topped the list of UK’s most searched-for skin care brands.

By Benjamin Ferrer