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The international luxury yacht market, which has struggled to recover from the 2008 recession, is finally being buoyed by the strong dollar. Spending among wealthy US buyers is underpinning many of the bigger custom yachts being built in British boatyards. (In June 2015, the pound bought $1.57; at the start of January 2017, it was $1.20.)
“The market is still beholden to currency swings,” says yacht broker Chris Cecil-Wright of Cecil Wright and Partners. “A strong dollar at the beginning of the year brought a surge of American buyers and charterers. We’re noticing a lot of quality new-build going in just now and all the good quality shipyards are full.” Trade body British Marine says the UK superyacht industry had turnover of £615m in the 12 months to April, its fifth consecutive year of growth.
The strength of the dollar against the euro for most of 2016 and the arrival of new technology billionaires have boosted European yards. German yard Lürssen and its Dutch competitors, including Feadship and Heesen, have strong order books, including two from founders of so-called unicorns (tech start-ups valued at more than $1bn), according to an industry observer.
Industry figures see the decision by the two unnamed young technology billionaires to buy superyachts as significant because in recent years the high end of the market has been dominated by Russian oligarchs, Middle Eastern royalty and, before that, Silicon Valley titans such as Paul Allen and Larry Ellison. If more founders of the current crop of tech unicorns follow recent buyers, it could be good news for yachtmakers.
Sale prices in the second-hand market remain depressed, though. According to the Superyacht Report, €3.4bn was knocked off the initial selling prices of second-hand superyachts between 2014 and 2016. “The sector has become stagnant through overvaluation,” says Mr Cecil-Wright.
One outcome has been more owners choosing to refurbish their existing yachts: in 2007, refitting was 30 per cent of superyacht builders’ business, according to British Marine; this year it is 58 per cent.
In the highly competitive production yacht sector, investment programmes among two of the UK’s biggest yacht companies are beginning to pay off. Poole-based Sunseeker, now in Chinese hands, returned to profit in 2016 after years of restructuring and losses, says chief executive Phil Popham. “Our product is a 100 per cent discretionary purchase. People don’t need luxury yachts, they want them.”
Antony Sheriff, executive chairman of Princess, the Plymouth-based yachtmaker, says the company is pursuing an aggressive programme of launches with robust order books. He is reluctant to attribute sales performance to currency fluctuations and the weaker pound since the Brexit referendum.
The industry is used to multiple currency contracts, says Toby Allies, sales and marketing director of Pendennis shipyard in Cornwall: “The benefit of currency can swing both ways. While we have the benefit of paying for labour in sterling, we’re paying for some imported components in euros.”
What the industry wants is stability. Mr Allies argues that while the outcome of Brexit negotiations is important for British-based boat makers, even more important are stable markets. “It would be good to see things resolved as soon as possible. Obviously it makes things more complicated but we just have to work through it.”
Away from Brexit, the waters of the Mediterranean by France are proving less than tranquil. The French government has been seeking to curb the use of yachts as floating tax havens and bring yacht ownership into line with European employment and tax law.
To placate resorts and yacht owners, the French government agreed this month to a temporary suspension of regulations requiring French-based yacht crews to register for social security payments. The rules followed measures to discourage owners avoiding VAT on diesel and other running costs through sham chartering arrangements. Tax officials and police have boarded several boats and carried out searches.
In response, some yacht owners avoided French resorts in the summer. Observers reported business from visiting boats was down 30-40 per cent. France is not the first Mediterranean country seeking to pull in more taxes from yachting, but the move does signal diminishing tolerance of the secretive ownership structures employed by wealthy yacht owners.
“There seems to be no coherent policy, particularly on the application of VAT, and this has been a real cause for concern. I’ve noticed much lower traffic using the tender dock here in Monaco,” says Espen Oeino, a superyacht designer whose office is based in the principality.