Brexit Boosts British Watchmaker Bremont as Swiss Sufferby
Weak pound lifts luxury spending in U.K. as tourism rises
Brexit effect helps Bremont weather Hong Kong sales drop
Watchmakers in Switzerland are reeling from fourteen straight months of falling exports, but a small firm in Henley-on-Thames, England -- better known for its annual Royal Regatta than fine timepieces -- is rowing against the tide.
Aided by a plunge in the pound, U.K. sales of Bremont watches have surged since the country voted in June to leave the European Union, co-founder Giles English said. That’s helping the company overcome a steep drop in watch sales in Hong Kong that’s contributing to the Swiss woes.
“It’s been very positive,” English said in an interview in a Portakabin conference room, one of four erected outside the chalet-style headquarters that the firm has outgrown. “Suddenly, it’s put Britain on the map again, in a weird way. We’ve always been waving this flag. Our whole thing’s been telling the story of British watchmaking.”
The success of Bremont shows how the Brexit referendum is helping some U.K. luxury goods companies, at least in the short term, as the country draws wealthy visitors lured by lower prices. While Bremont is closely held, shares of other U.K. luxury-goods companies, including Burberry Group Plc and Mulberry Group Plc, have surged since the referendum.
Swiss watch brands owned by the likes of Cie Financiere Richemont SA, LVMH Moet Hennessy Louis Vuitton SE and Swatch Group AG are struggling. Sales, already under pressure from the rise of smartwatches, have been hit by a string of terrorist attacks in France and other Mediterranean tourist destinations that are deterring free-spending travelers.
Bremont exports about 60 percent of the 8,000 to 10,000 timepieces it makes per year. While sales have fallen by around 20 percent this year in Hong Kong, English said, the company is on track for an overall gain of 15 percent for the whole year as the U.S. and the U.K. show strength.
It could take as much as six months until tourism numbers reflect the full effect of a weaker pound, said Guillaume Gauville, analyst at Credit Suisse. By that time, he added, many watchmakers may have raised prices.
“You make your booking in July and then you travel in the fourth quarter or something like that,” he said. “But will the price differentials be as high as they were in July-August? The answer is no.”
While Bremont says it has held U.K. prices steady, the fall in the pound is not an unalloyed boon. Parts imported from Switzerland account for about 30 percent of the value of the firm’s watches, which sell for 2,695 to 27,950 pounds ($3,509 to $36,400). Despite a rich history of horology in the U.K. -- watch-making Huguenots left France for England and Geneva in the 16th century -- the industry has lost much of the expertise to Switzerland. With the franc up about 13 percent against the pound since the referendum, Bremont’s costs have swollen, too.
Bremont is working to reduce its reliance on Swiss parts for its watches. It has hired engineers with backgrounds in auto racing and the defense industry and is working with the Advanced Manufacturing Research Centre in Sheffield, England, to develop new processes.
“We’re at least 30 to 40 percent less efficient than our counterparts in Switzerland for building watches,” English said. “We always knew this. This is an investment, and we’re getting better and better.”
Despite falling exports, Swiss brands like Rolex, Omega and Patek Philippe still dominate the industry’s high end. Only a handful of luxury German manufacturers from the small town of Glashuette have managed to establish themselves alongside their better-known Alpine rivals.
English and his brother and business partner Nick understand adversity. They started selling their watches, which can take two years to build, in 2007, just before the global financial crisis. Bremont is named after a farmer who hosted them when they had to make an emergency landing in a 1930s biplane they were piloting over rural France. Giles English broke his back in a separate flying accident.
“We’re not used to an easy run,” he said during a tour of Bremont’s workshop.
The English brothers’ love of flying is reflected in Bremont’s designs. Its latest top-end model includes fabric from the Wright brothers’ airplane that made the first human-controlled flight in 1903.
Military clients make up about one-fifth of sales. One line of watches was developed with Martin-Baker Aircraft Co., which makes ejection seats, and is designed to withstand the rigors of a pilot being jettisoned from a plane.
Bremont is set to introduce a women’s line next month. It plans to move to a new headquarters in the next couple of years -- getting rid of those Portakabins.