Cost of luxury goods rising '˜faster than CPI'

The cost of luxury goods and services has risen more than twice as fast as that of everyday items, driven by strong rises in the price of a private school education.

The Coutts Index operates differently from the CPI.

The Coutts Luxury Price Index, which measures luxury inflation, rose by 5.9 per cent for the 12 months to the end of October – more than double the latest Consumer Price Index (CPI) figure of 2.4 per cent.

The Coutts index, published twice a year, covers around 150 goods and services from across 12 categories. It found that private secondary school fees have tripled in 20 years – including a 4.3 per cent rise over the past twelve months – while the cost of a private education continues to rise faster than inflation.

Other fast-rising categories include designer clothing brands, high-end alcohol and luxury food items such as oysters.

Mohammad Syed, head of asset management at Coutts, said: “If you’re putting money aside to help realise a long-term goal, such as paying school fees for your children or grandchildren, or helping them buy a property, the harsh truth is that the current interest you get from a savings account can’t keep up with inflation.

“While keeping your cash in such an account has advantages – easy access to your money and greater security – it may be beneficial to investigate other options like a long-term, diversified investment strategy.”

Clothing prices are up 5.2 per cent, the index found, with some brands raising prices by as much as 11 per cent. The study said that global luxury brands had exercised the “pricing power” linked to the customer loyalty they command by raising prices higher than inflation consistently over the past two years. Smaller, independent luxury retailers, on the other hand, have kept their price rises steadier.

Meanwhile, fine wine is up by 11 per cent and whisky by 26 per cent, while restaurants and hotels overall rose in price by 5.6 per cent. The popularity of portable technology abounds with prices in the communications category – which includes smartphones and tablets – soaring over 16 per cent. The report said this was driven by a rise in popularity of high-end handsets costing more than £1,000, such as the iPhone X, which cost £1,150 last year, while this year’s top end model, Apple’s iPhone XS Max, retails at £1,450.

Household goods and services have also shot up by ten per cent, seeing their largest price rise since the Coutts index began in July 2017.

The report said: “This could be due to the current uncertainty hanging over high-end UK property because of Brexit, among other things. People are possibly doing up their existing homes rather than buying new ones and service providers are raising prices accordingly.”