Starbucks has revealed plans to invest £30m in the UK and open 100 new cafes, a year after it was reported to be considering selling the British arm of the coffee chain.
The investment plan came as the company reported it paid lower tax on its UK operations in 2022, even as gross profits surged, as royalty payments to other group companies expanded rapidly.
The coffee chain paid £4.6m in corporation tax in the year to 2 October 2022, compared with £5.4m the year before, according to its latest accounts.
Seattle-headquartered Starbucks had reportedly been considering selling the UK operation.
The chain appointed Laxman Narasimhan as its chief executive last year. Narasimhan, who had been chief executive of the FTSE 100 company Reckitt Benckiser, has been tasked by Howard Schultz, the coffee chain’s billionaire founder, with expanding Starbucks with a particular focus on the US and China.
However, the UK investment programme appeared to suggest Starbucks will hang on to its British cafes, which reported stronger financial results including revenues of £449m, rising above pre-coronavirus pandemic levels for the first time.
The UK subsidiary’s gross profits expanded to £129m, up from £95m. Yet those gross profits did not translate to higher profits before tax, as it paid £60m more for products and its staff bill increased by £26m. Royalties and licence fees, which it pays to other Starbucks companies, also grew rapidly, from £26.5m to £34.5m, reducing profits before tax.
The company noted a “challenging inflationary environment during the year”.
About 30% of Starbucks 1,066 cafes in the UK are operated by the company directly, while 70% are run as franchises by other businesses which pay to use the brand. The £30m investment will cover a three-year renovation programme for the company-operated stores, as well as some of the new openings.
Starbucks EMEA, the UK-based subsidiary covering Europe, the Middle East and Africa which receives the royalty payments, made a profit before tax of $76m (£63m).
It booked a charge of $19.5m for UK corporation tax compared with $13.2m in the year before. The company, which has built up $2bn in shareholders’ funds, did not pay a dividend to the US parent unlike in previous years.
Campaigners have previously criticised Starbucks’s use of royalty payments, which can help to shift profits from one country to another. The company shifted the EMEA company to London after intense criticism.
Duncan Moir, the president of Starbucks EMEA, said: “While we are cautious about the macroeconomic environment, we will continue to invest to grow the region this year. We plan to open over 100 new stores in the UK and 300 new stores in EMEA, to continue this growth momentum.”
• This article was amended on 6 March 2023. The headline was changed to clarify that it is the tax on British sales that has fallen, rather than Starbucks’ overall “British tax bill” as an earlier version said. And the main text was amended to add detail regarding the impact on profit figures of higher bills for products and staff.
