‘It’s brutal, they feel very attacked’: budget uncertainty hits Southampton boat show | Luxury goods sector

“W.What happens if red wine mixes with this?” It’s a common enough question when perusing a carpet store. However, the same question arises when shopping for a yacht. “Oh, you’ll never get it off that deck,” the other half of a young couple replies as he sizes up one of the £2 million three-deck yachts moored at the recent Southampton international boat show.

Leading boat builders flocked to the port city from across Europe to showcase ever bigger, better and bolder yachts, as well as smaller ranges of sailing and powerboats. But the show, once the season’s must-attend alongside exhibitions in Cannes and Monaco, has shrunk by nearly 30% this year, according to some dealers’ estimates.

Some of the changes were part of an effort to reduce the show’s costs, but it’s not hard to see why it might be smaller this year: Flags advertising recommendations on inheritance tax and pensions are flying in the wind and chatter about the government’s budget this month is swirling around barges amid fears that higher taxes will limit the spending power of wealthy buyers.

Those with the “broadest shoulders” should pay their “fair share”, said Rachel Reeves as she examined ways to repair the public finances. The exact method the chancellor will use to tax the rich is unclear. Reeves has previously ruled out introducing a new “wealth tax” but other options have been put forward, including increasing the capital gains tax rate; Introducing national insurance on rental income and establishing higher council tax bands.

Bill Stringer of boat broker Key Yachting says it’s harder than ever to secure sales this year. “We are in a weak spot,” he says. “There’s a lot of uncertainty in the world. Customers have money, but they’re being more cautious, and people have budgets on their minds.”

According to SuperYacht Times, sales of vessels under 50 meters are down 12% due to a sharp decline in sales of sailing yachts in the 30 to 40 meter range. Sales of motor yachts between 30 and 40 meters remain flat.

Stringer adds: “Buyers are holding off because they want to see what’s going to happen in the budget. We’ve had a few people say they were going to sell their business at the beginning of the year, but they’re going to hold it back.”

“It’s hard to make sales, but it’s possible. It’s uncertainty, not availability of money, that prevents people from making decisions.”

‘Suck it up – let’s get a boat’

Pressure is also mounting in some corners of the UK’s luxury boat market. Princess, headquartered in Plymouth, and Poole-based rival Sunseeker International are leaders in the industry, and last year, Sunseeker announced plans to reduce its hourly wage workforce by around 260 positions.

Chief executive Will Green told employees that 2024 was the “toughest trading conditions in the company’s history” and that Labour’s first budget had “severely impacted” its recovery plan.

Now, marketing to millionaires shopping at the Southampton fair is critical as the industry prepares for Labour’s second budget.

Approximately 90,000 visitors, including hobbyists and serious buyers, came to the fair for 10 days, visiting the yachts lined up on pontoons. These are impressive vehicles, many close to 30 meters in length, equipped with luxurious double bedrooms, en-suite bathrooms, marble-lined kitchens and huge media units.

The industry says it adds £4.7bn of gross value to the UK economy, and at the show it’s easy to see why. There are big spenders in the crowd: A pro doing somersaults on a jetski attracts a group of middle-aged men eyeing a potential new toy.

A shipyard stage brings live music to the show daily, as well as food trucks and a Guinness bar. It definitely helps keep your mood upbeat. Phil Dollin of Inspiration Marine Group, one of the UK’s largest boat dealers, says despite growing concerns about tax there are still some buyers willing to take the risk. In addition to Privilege Catamarans, his group also represents sailing yachts Hanse, Dehler and Moody.

“When there is a change in government policy, it tends to be quite negative towards higher net worth individuals, and they get nervous and hold on to their money,” he says.

“But then another year goes by and they realize they’re getting old. It looks like we’re at that stage now: they think, never mind, let’s get on with this.”

Dollin, whose average sale is worth around £400,000, says it is changes to inheritance tax on pensions that are most upsetting to his buyers, most of whom are aged between 60 and 70. Starting from April 2027, defined contribution pension checks will be withdrawn to the IHT network.

“It’s brutal,” he says. “They feel very attacked. There’s definitely a bad feeling towards the tax regime at the moment.”

A cap on how much people can gift before paying inheritance tax is reportedly being considered (which currently does not apply if the donor lives for another seven years), which could impact boat owners. However, the high property taxes discussed could still make boats an attractive proposition for consumers looking to make a lump sum investment.

Yet boats are complex assets to manage: the main taxes when buying a yacht in the UK are VAT and customs duty; these may vary depending on where you purchased the craft and where you plan to use it. Fortunately for yacht owners in the UK, the EU has a “temporary acceptance” scheme where boats paying UK VAT can sail in EU waters for up to 18 months at a time without paying European VAT on the boat itself.

However, like cars, yachts gradually depreciate, although usually at a slower rate. According to SuperYacht Times, the price of second-hand yachts longer than 30 meters dropped by an average of 7.9% in 2024.

Budget isn’t the only factor deterring buyers, either. “We didn’t think the cost of living crisis and high interest rates would impact the market, but it seems to have,” Stringer adds. “The other factor is that new boat prices have risen dramatically in the last five years; in 2010 a dentist, lawyer or headteacher could buy a boat on their salary. Now you have to either make someone die or sell your business.”

Cash buyers on board

However, there is also a select group of buyers who can afford a higher tax bill as well as a brand new boat. Stuart Brotherton, sales network director at Ancasta, one of Europe’s largest shipping brokers, says the group has had its best ever September in terms of sales, bringing in more than €20 million (£17 million) combined from the Cannes and Southampton fairs.

The group sells a wide range of models, from €15,000 to yachts worth over $22 million.

“Sales have occurred across all our brands, from a small Beneteau sailboat to a deal being reached for the 30-metre (96 ft) Sanlorenzo,” he says. The luxury yacht costs more than £4 million.

“Some people get carried away, get caught up in the boat show excitement, then talk to their accountants and realize it’s the wrong time to withdraw a bunch of money.

“Sometimes we can get them financing, but some people are resistant to borrowing.”

Stringer says most serious customers who watch the show are cash buyers.

“There’s a lot of marine finance around but it’s so expensive, I don’t know why anyone would do it,” he says.

“Buying a boat is a complex event. It’s a very emotional situation and family, partner, finances – all of this needs to be in place.”