Falling pound fashionable among London tourists but fails to lift aviation

The contrasting effects of the slump in the pound were on display yesterday from Burberry and Ryanair.

Burberry said its sales had outpaced expectations thanks to tourists in London taking advantage of a weakened pound to buy its trench coats, scarves and gloves.

Meanwhile, Ryanair cut its profit outlook for the year as the decline in sterling weighs on fares.

The two companies, like their peers across the country, are finding their finances affected by the 17.7 per cent drop in the value of the pound against the dollar since the Brexit vote.

The pound ranks as the world’s worst-performing currency against the US dollar for the year to date. Its 17.3 per cent drop for the period puts it between the Angolan kwana and Guinean franc on the laggards table.

In reporting its 2 per cent gain in second-quarter retail sales, Burberry said a “significant outperformance in the UK”, as well as positive trading in Europe, had led to its first gain in comparable sales for four quarters.

“Improved performance from the traveling luxury customer in the second quarter was most significant in the UK,” London-based Burberry said, adding that comparable sales rose 30 per cent in that region.

Analysts had been expecting a 1 per cent rise in overall second-quarter retail.

Burberry has been one of the best-performing stocks since Britain voted to leave the European Union on June 23. Through Monday, its shares were up 35 per cent for the year to date. Still they sank 7.5 per cent yesterday as the increase in British sales was offset by continued weakness in Asian markets.

In comparison, Ryanair stock had fallen 13.6 per cent since the Brexit vote.

The budget airline said yesterday that its full-year earnings are likely to increase by about 7 per cent rather than the 12 per cent previously estimated, because of the low-flying pound.

Net income is likely to be in the €1.3 billion (Dh5.25bn) to €1.35bn range, rather than between €1.375bn and €1.425bn as previously estimated, Dublin-based Ryanair said.

“The recent sharp decline in sterling post-Brexit will weaken second-half yields by slightly more than we had originally expected,” it said. “While higher load factors, stronger traffic growth and better cost control will help to ameliorate these weaker revenues, it is prudent now to adjust full-year guidance.”

Britain is expected to account for about 26 per cent of Ryanair sales this year, the carrier said.

* Agencies

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks.

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.

8. Pillar 2 implementation

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer