Swatch: Rachel Reeves’ tax hikes could see profit fall further
Swiss watch brand Swatch has warned its UK profit could continue to shrink as a result of Chancellor Rachel Reeves’ tax hikes.
The business has said the increase in employer’s National Insurance contributions – which were announced in October 2024 and came into effect in April this year – will increase operational costs.
Swatch added that the move could have potential impacts on profitability and business growth.
However, the UK arm of the wider group said it is working to mitigate the impact by “maintaining the strength of [its] brands through new and innovative products, strategic advertising and maintaining strong relationships with its customers”.
The update has been included in new accounts filed for Swatch’s latest financial year with Companies House.
The results have revealed the brand’s pre-tax profit fell from the £11.1m it reported in 2023 to £7.5m in 2024.
The latest total comes after Swatch’s pre-tax profit totalled £23.6m in the UK in 2022.
Swatch’s UK sales on the slide
Swatch’s 2024 figure is the lowest its pre-tax profit has been in this country since the £1.6m it posted in 2020 – a year heavily impacted by the Covid-19 pandemic.
Discounting the pandemic-hit 2020, Swatch’s UK pre-tax profit is the lowest it has reported since the £4.8m it made in 2018.
The accounts have also revealed that the brand’s turnover declined in 2024 from £218.1m to £193.7m.
The company said its pre-tax profit fell in 2024 because of the lower turnover as well as an increase in the cost of sales plus distribution and administration expenses – the latter of which rose by six per cent to £67.7m.
In a statement signed off by the board, Swatch said: “Economic conditions in the markets in which the company operates, included, but not limited to, levels of employment, interest rates, tax rates, inflation, government policies, increasing National Insurance contributions as well as political factors beyond the company’s control may affect consumer confidence and reduce purchasing power weighing on sale volumes.”
Omega watches maker hit by China decline
While UK sales and profit have been falling, the wider Swatch Group has been facing a series of other headwinds from the likes of activist investors, its competitors and China.
In May, Steven Wood, founder and chief investment officer of New York-based GreenWood Investors, attempted to gain a seat on the group’s board.
He also released a six-point plan, which he argued would improve the group’s fortunes.
At the start of 2025, Swatch revealed its profit had plunged by almost 75 per cent – with its performance in China being of particular concern.
The maker of Omega, Longines and Tissot watches also revealed its full-year sales fell 14.6 per cent.
Its sales in China and South East Asia, which are mainly dependent on Chinese tourism, declined by 30 per cent in 2024.
Swiss watch market faces uncertain time
The UK results for Swatch come after sales for the wider Swiss watch industry fell significantly in May after anticipation of steep tariffs caused a downturn in the US market.
City PM reported last month that that exports fell 9.5 versus May, according to figures from the Federation of the Swiss Watch Industry, reversing a recovery in sales that has been brewing since the start of the year.
The market for mid-priced watches – between 500 and 3,000SWF (£455-£2,735) – remained steady, while the other main price segments dropped by 11.4 per cent on average.
The United States, the largest global market for luxury watches, accounted for over 40 per cent of the global decline, with imports down 35.2 per cent.
Sales to Japan fell 10.5 per cent and sales to the UK fell 14.5 per cent.
President Donald Trump’s threat of 31 per cent tariffs on US imports from Switzerland appeared to be the driving force behind the slump, with the watch industry heavily reliant on the US.
Earlier this month, Watches of Switzerland warned scores of its products in America will see price increases due to President Trump’s 10 per cent tariff on non-US goods.
The London-listed company, which sells luxury timepieces from Patek Philippe, Rolex, and Audemars Piguet – amongst others – said the price increases from partners were in the mid-single digits so far.
The firm said the long-term impact of the tariffs “remained uncertain”.
At the same time, the group revealed its revenue increased by eight per cent to £1.6bn in the year to 27 April, driven by US growth of 16 per cent.
Adjusted earnings before interest, tax depreciation and amortisation (EBITDA) grew eight per cent to £192m, while operating profit fell five per cent to £114m.