High-street favourite Starbucks has blamed a slowing British economy and public concerns over the impending Brexit negotiations for a dramatic slump in its UK profits, blaming a retail-wide weakening consumer confidence for a drop in sales and a slackening of footfall through its stores. 

Pre-tax profit slump

The US coffee house chain saw its pre-tax profits nosedive by a spectacular 60 per cent to a mere £13.4 million in the year to October 2016, according to figures quoted from accounts that were filed by Starbucks at Companies House. In addition, the company’s turnover for the year also fell from £405.6 million to just £379.9 million.

A spokesman for Starbucks explained that its UK operation had experienced “significant economic and geopolitical headwinds” over the last year, which had conspired to decimate sales. It was also felt that Brexit and the ongoing public concerns surrounding security had also weakened consumer confidence and impacted sales.

Footfall across all the coffee giant’s UK stores was also reported to be down on last year, leading to a fall in sales from 3.8 percent to just 1 percent in the period. Starbucks is attempting to mitigate the impact of falling sales by closing many of its less profitable UK stores and reducing its costs through shedding staff and reducing overheads.

However, a spokesman for the chain said that the business was expected to hold up well as the focus was maintained on cost management, together with the strategic realignment of its portfolio.

Optimism for the future

Starbucks came under intense scrutiny and criticism in 2012 following revelations surrounding the low amount of taxes it pays in the UK, and the organisation reportedly paid £6.7 million in taxes last year as opposed to £8.4 million in 2015.

Despite a less than perfect performance over the last 12 months, the president of Starbucks Africa, Europe, and the Middle East, Martin Brok, was upbeat, praising the company for recording a profit for the third year in succession.

Mr Brok also felt that although there are clearly challenges ahead presented by the cautious consumer environment, adverse currency impacts, and lower footfall through the high-street stores, the brand was still investing heavily in an effort to drive innovation in its coffee and food offering. Thus far, the company has been greatly encouraged by the response it has received from its loyal customers.