Starbucks Commitment to the UK
Following a number of stories in the media over the last day about Starbucks and the amount of tax we pay each year, I believe it’s important that we share the facts with you on this important issue.
The most important thing to understand is that Starbucks does pay tax in the UK. Indeed over the last three years we have paid over £160 million in various taxes including National Insurance contribution for our 8,500 UK employees, and business rates.
The truth of the matter is, the one tax that has been debated in the media, corporation tax, is based on the profits we make in this country – and regrettably we are not yet as profitable as we’d like to be. Is our ambition to be much more profitable, and therefore pay more corporation tax? Absolutely right, and that is why we are making long-term investments in the UK, creating new jobs, opening new stores and delivering new and innovative products for our customers.
The UK represents a very important market for us and I want to be really clear about what contribution we make to the country. Yes, we pay our taxes, but we are here to invest and grow the business. We have raised capital to invest in 5,000 new jobs and open 300 new stores up and down the country. We are also creating 1,000 apprenticeship positions. We contribute to Britain by buying local products such as cakes, milk, sandwiches and using local suppliers to do things like store design and renovation. I am confident these kinds of investments will make us more profitable in the future, and as a result, the corporation tax we pay will increase.
I also wanted to clear up some misapprehensions about a few aspects of our business that have impacted our financial performance: how we source and roast our coffee beans, the royalty we pay to use the Starbucks brand in the UK and the competitive nature of selling coffee in the UK.
Let me start with the beans. To achieve economies of scale for the region we have a buying operation in Switzerland and a shared roasting plant in Amsterdam – it doesn’t make good business sense for wholesale bean buying or roasting to happen in each country. So for the UK we buy and roast our coffee in Europe, the same as other Starbucks businesses in the region.
In terms of the fees we pay to use the Starbucks brand, we pay a royalty levied against our revenues to use the brand in the UK. This is applied wherever we operate in the world at a consistent rate, as is the case for many other global brands.
Finally, the UK is one of the most competitive places to sell coffee in the world and this has had a real impact on the profits we make and therefore the corporation tax we generate. There are three reasons for this. The rent we pay on our stores here in the UK is among the highest in the world. We spend more on the quality of our coffee than our competitors – offering 100% Arabica and 100% Fairtrade espresso coffees. We also spend more on store design so the customer experience is as good is it could possibly be. We have heard that these investments in quality are important to our customers and they are certainly important to us – and well worth the investment. We haven’t always got it right in the past but all of these initiatives, and our focus on making sure we give British customers what they want and need, have put us on a track for growth.
I want to say that this is a really important issue to me and to Starbucks. The UK is one of the most dynamic espresso markets in the world, and we’re proud to do business and pay taxes here. As we continue to grow, we will employ more and more partners and contribute to the communities where we do business in new and meaningful ways.
Thank you for listening and I look forward to reading your comments and suggestions.
Starbucks Coffee UK