Starbucks suffers first UK sales fall after tax row

Coffee chain’s revenues slide 3.4 per cent after boycotts and criticism of offshoring

Starbucks’ sales have tumbled in Britain in the wake of its tax-avoidance row. The coffee shop chain also came under fresh attack yesterday as accounts showed it had kept its controversial offshore structure that wipes out profits in the UK.

The company said revenues fell by 3.4 per cent to £399.4m in the year to September from £413.4m a year earlier.

Starbucks insisted it had suffered no consumer backlash since its tax avoidance emerged in 2012. It was revealed that it paid just £8m in tax on £3bn of UK sales since 1998. A spokesman maintained sales had fallen only because it closed “a number of unprofitable stores”.

He said: “The UK is our fastest-growing market in Europe. Gross profit is up 13 per cent and operating margin is up more than 22 per cent. The loss before tax fell by more than 30 per cent. We are on schedule to open 100 new stores this year and expect the business to continue to grow.”

However, the UK business still made a pre-tax loss of £20.4m. That appeared to be the result of Starbucks’ continued policy of funnelling revenues offshore, primarily to the Netherlands, by charging the British operation royalties to use the Starbucks brand and its coffee beans.

Margaret Hodge, the Labour MP who chairs the Commons Public Accounts Committee, which has questioned executives from Starbucks, Google and Amazon about offshore tax avoidance, said it “beggars belief” that Starbucks could keep making a loss.

“If it is right that the UK is the best market in Europe and it is the most profitable, how on earth can it continue to file losses?” she asked.

Starbucks’ accounts showed that it did pay £3.4m in corporation tax last year, up from nothing a year earlier, but the company confirmed that this was a voluntary decision.

A year ago, the coffee giant said it would pay £20m to UK tax authorities over two years, explaining that it “would not claim deductions for the royalties it pays, for the coffee it purchases and for interest paid on intercompany loans”, and that it “would not claim capital allowance deductions nor carry-forward losses”.

It is understood that the £3.4m is the first part of that £20m contribution, which was widely seen as an attempt to defuse the political and consumer storm over its tax avoidance. Last week, Starbucks committed to move its European headquarters from the Netherlands to Britain in what looked like another move to assuage its critics.

Ms Hodge said: “The contradication no ordinary person can understand is that how, on the one hand, they talk about the importance of the UK coffee market and that is why they are moving their European HQ to the UK, and yet year after year they file losses.”

Starbucks will possibly pay more UK tax if it bases its European operations in Britain.

Start your day with The Independent, sign up for daily news emails
Life and Style
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
Arts and Entertainment
Lena Headey as Cersei Lannister
TVSPOILER ALERT: It's all coming together as series returns to form
footballShirt then goes on sale on Gumtree
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine